Sunday, December 17, 2006

Donors criticise Vietnam, but the cash keeps coming

HANOI (AFP) - Vietnam this week scored a fresh diplomatic victory when it won a major increase in development aid, despite criticism of its human rights record and corruption at the heart of the communist regime.

After hosting the Asia-Pacific Economic Cooperation ( APEC) summit last month and securing entry into the World Trade Organisation, Hanoi has earned another show of support with the pledge by donors of 4.44 billion dollars for 2007.

"This amount of aid reflects your strong support to the government of Vietnam," said Planning and Investment Minister Vo Hong Phuc.

"The figure surpasses the Vietnamese government's expectations as well as those of many donors."

Last year international donors promised 3.7 billion dollars, and the more than 700-million-dollar increase is due in large part to the doubling of aid from the Asian Development Bank (ADB), which has pledged 1.14 billion dollars.

"Vietnam needs to be more and more competitive quickly -- much faster than other countries," said Ayumi Konishi, the ADB's director in Hanoi.

"We think this is the time when Vietnam has to accelerate... We are trying to provide support."
Exchange rate fluctuations have also worked in Vietnam's favour, accounting for around 200 million dollars in state coffers.

Nonetheless, the announcement is impressive for a country that was this year rocked by a corruption scandal at a department of the transport ministry largely funded by foreign aid.

The affair -- which saw officials embezzle tens of millions of dollars to finance their lavish lifestyles and bet on European football matches -- shone the spotlight on the corruption endemic in all levels of Vietnamese society.

The World Bank launched an inquiry, but said this week the results were still being scrutinized in Washington. Japan, whose aid is used in part to fund the department concerned, maintained its funding at 890 million dollars.

For Carl Thayer, a Vietnam expert at the Australian Defence Force Academy in Canberra, the levels of funding reflect Vietnam's rising power in the international arena.

"Vietnam has made the right noises," he told AFP.

"Everybody has these fantastic expectations about Vietnam and they want to be a part of the market."

Hanoi has also won a non-permanent seat on the UN Security Council for 2008-9.

"Strategically, part of the donors' question is that Vietnam... will carry much more weight.

Vietnam is manoeuvring itself to be very attractive," Thayer added.

The impressive results of the fight against poverty in Vietnam also enables donors to justify their aid -- governments have to show their voters some symbolic successes, analysts say.

"Donors need a country where it works. If you pour millions of dollars into countries that do not develop themselves, public opinion goes against you. Vietnam gets results," said one diplomat.

Even the questionable human rights situation has also failed to dent donors' confidence.

Hanoi freed a few dissidents in the months leading up to the APEC summit, but it cracked down on them during the meeting, to keep them from having any contact with the foreign media.
Some were locked in their homes, while others complained of violence.

The government and donors discussed Vietnam's human rights record at length. But according to several delegates, none of them suggested linking aid levels to human rights.

"The Vietnamese are clever about how they present things. What they do afterwards is another matter," the diplomat said. "But the opening up, from year to year, is genuine... We must now continue to do some monitoring."

In The United States, pro-democracy exiled movement Viet Tan asked donors to ensure more "transparency and accountability" and to support "grassroots organizations independent of government control."

"The key to poverty reduction and economic development in Vietnam is a vibrant civil society," said Viet Tan's spokesperson Chi Dang.

Investment from US to Vietnam likely to reach US $8 billion in 2007

Nhan Dan (Vietnam Communist News)

US Ambassador to Vietnam Michael Marine has forecasted that foreign investment from the US to Vietnam will probably double to US $8 billion in 2007, up from US $4 billion in 2006.

He told reporters in Hanoi on December 13 that in 2006, investment from the US to Vietnam reached US $4 billion. US businesses will start to implement three or four major projects in Vietnam next year. If this happens, the US’s investment in the country will reach US $8 billion.

He also said that most of businessmen from the US, Vietnam and other countries, who had taken part in the Vietnam Business Forum in Hanoi on December 13, were optimistic about the prospect of their investment in Vietnam.

“2007 and the time after 2007 will be a very good time for Vietnam to attract more FDI. However, this will not be the case unless Vietnam continues its economic reform,” Marine stressed.

Regarding bilateral relations between the two countries, Ambassador Marine said that the US considered Vietnam as not only a good partner in trade and investment, but also in strategic and political issues.

According to the Vietnamese Ministry of Planning and Investment, by last month, the US had 305 investment projects in Vietnam, with a combined registered capital of US $2.1 billion and an estimated disbursement of US $730 million. The US was ranked 9th among the 75 countries and territories that have invested in Vietnam.

Seventy four other projects in Vietnam, capitalised at about US $2.4 billion, were invested by US businesses via third countries.

If combining direct investment from the US and its indirect investment through third countries, the total investment from the US to Vietnam reaches US $4.4 billion, and the US becomes Vietnam’s fifth largest foreign investor. (VNA)