Int'l Cooperation

Last updated: Thursday, February 21, 2019


Consistency Needed in Policy Implementation

Posted: Friday, May 20, 2011

"Inflation in Vietnam is higher than other ASEAN economies and among the highest in the world.” That is the opinion of Mr John Hendra, Resident Coordinator of UN in Vietnam, speaking with Vietnam Business Forum reporter on development issues in Vietnam. He will end his term of office in a few weeks’ time after 5 years in Vietnam.
According to Mr John Hendra, like many other Asian countries, Vietnam has been facing more severe inflationary pressures than other regions in the world. This area is very close to overheated growth, and inflation is climbing to the level that can hardly be lowered again. Food prices and housing, along with transportation costs and increased energy are the main factors causing increased inflation in Vietnam, as in other countries of the region. Prices for key consumer goods also increased rapidly. Inflation in April 2011 increased 17.5 percent over the same period last year, the highest level since December 2008.
The Vietnam government issued Resolution No. 11 which was a turning point not just in policy planning but also in policy thinking. For the first time in the past several years, growth is no longer considered an immediate priority, this shows the growing consensus on diverting the focus from "quantity" to "quality" of growth and development.
During your work in Vietnam, which areas do you consider to be the most successful and what challenges remain?
The most successful thing that I've done during the term of my work is to make parallel the role of the UN with the Government of Vietnam, oriented policy support and other issues in general such as the problems of migration, domestic violence, climate change, etc., which was quite successful, contributing to strategic social and economic development in Vietnam.
We also noted many comments and criticism of policy with Vietnam Congress in terms of welfare, social security, contribution to growth in GDP per capita of Vietnam, economic development in parallel with poverty reduction, ensuring social security, and promoting the citizen participation in policy development activities.
However, there are still some criticisms from the UN on a number of policies that have not been implemented, such as the matter of public investment, inequality and improving education, especially university education.
In particular, in the context of WTO accession, Vietnam has to solve the corruption issue, because corruption is a blow to the poor. Corruption is a painful problem for many countries, and Vietnam is no exception, but the situation is particularly alarming in the domain of education and health care, because of its direct impact on the poor who most need support today.
To combat corruption effectively, consistency is essential. Vietnam’s anti-corruption law was quite comprehensive, but the enforcement of laws and policies outlined at the lowest unit level has not been consistent.
Over the past year, the UN has launched and worked to implement the idea of "One UN", and Vietnam may also make such efforts, "Another Vietnam," consistently. When implementing reform, policies must be consistent, no differences, no specific mechanisms for this locality or other localities.
One of the Government's requests in Resolution 11 is that "the ministries, agencies and localities shall rearrange the tasks of spending to save an additional 10% of recurrent expenditure in the remaining months in 2011 estimates." What are your comments on this?
It is necessary to clarify which fields or areas the decision to cut 10% of regular budget expenditures will be targeted at. A number of policies to reduce poverty and social assistance are financed from the regular budget, thus, reducing the budget for these policies will directly impact the poor. It is also necessary to ensure greater efficiency of public investment by the government, and this should be considered an immediate priority. Consideration in this respect, the strong commitment of the Government in reducing investment in inefficient state-owned enterprises, and agricultural support, export, and supporting industries and SMEs, is a positive sign. However, if you make the cut – which is essential – for the inefficient State investments in infrastructure construction, we will be seeing more job losses for construction workers.
Since mid 2006, Mr John Hendra has been the Resident Coordinator of United Nations in Vietnam. During his work in Vietnam, John Hendra has contributed actively to the implementation of the Initiative "Unified Action" in Vietnam. With the implementation of five Pillars: plan; general budget; shared leadership; general management rules; and a common house. The initiative "unified action" in Vietnam has been appreciated by international colleagues and welcomed by the sponsor community. In his working term in Vietnam, John Hendra, together with other UN organisations, persuaded active donors to give US$ 90-100 million per year to Vietnam.
Vietnam Minister of Planning and Investment, Vo Hong Phuc, has decided to award a medal of Initiative "Unified Action" for Mr John Hendra in recognition of his contribution to the activities of the United Nations in Vietnam. After completing his term of office in Vietnam, John Hendra will officially assume the title of Assistant Secretary General, Deputy Director General of the UN Women.
Urban poor are subject to the direct impact of inflation, particularly poor migrant workers, former civil servants on pensions, and those with low incomes. They face many difficulties with food prices and the rise of electricity and fuel cost. Deciding to gradually reduce subsidies for the energy sector in Resolution No 11 would only exacerbate this situation. The rural poor are also affected by rising prices. Some people have to find ways to earn extra income to ensure basic costs for food. In the long run, inflation is likely to cause many families to return to poverty. If inflation lasts and growth rate gets lower, Vietnam will likely once again face unemployment and underemployment as high as in the recent financial crisis.
Initiatives such as subsidies for the poor to cover the cost of electricity are very commendable. However, these initiatives cannot reach those who need support the most, because poor migrants are not registered permanent residents, and thus not entitled to these benefits. The UN is also concerned that unemployment insurance may not be beneficial for those who need it most, like during the financial crises when employers could not pay the redundant allowance for workers.
Much is said about the middle-income "trap" that Vietnam could find itself in. According to you, what should the Vietnam government do to avoid this situation?
Traps are everywhere, so we should not fall into illusion or disillusion. Important issues that should be avoided are that, in the economic development strategy, Vietnam should promote social stability, the model focusing on low-carbon growth, and sustainable policies. China, during the past five years has focused on sustainable growth rather than boosting spending. Vietnam should improve environmental sustainability and reduce inequality to bypass the middle-income trap that many countries around the world have suffered.
Therefore, solving the macro-economic policy, education for all people, training high quality human resources at the right time, using new environment-friendly technology, promoting long term vision rather than focusing on the short and medium term are the keys to solving this problem.

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