UNDP expert gives recommendations for Việt Nam to overcome challenges

With Việt Nam determined to take drastic measures to not just recover the economy but also work hard toward development priorities, Việt Nam News Agency (VNA) asks Jonathan Pincus, UNDP Senior International Economist, for recommendations to speed up the nation’s efforts and achieve its set targets.

With Việt Nam determined to take drastic measures to not just recover the economy but also work hard toward development priorities, Việt Nam News Agency (VNA) asks Jonathan Pincus, UNDP Senior International Economist, for recommendations to speed up the nation’s efforts and achieve its set targets.

As a development partner that has helped Việt Nam work its way toward human centred development and sustainable growth, what are your assessments on the current economic situation in Việt Nam and what are the challenges lay ahead?

Việt Nam has made tremendous progress toward achieving the Sustainable Development Goals by 2030. The headcount Multidimensional Poverty Index, which considers income and access to basic services and amenities like healthcare, education, housing, clean water and sanitation, fell by more than half from 2016 to 2022 from 9.2 per cent to 4.3 per cent of the population. These gains were achieved despite the disruption of the COVID-19 pandemic and its impact on jobs and incomes.

Việt Nam has made gains on other goals such as an increase in upper secondary school enrolment rates and further declines in maternal mortality. Although still a lower middle-income country, Việt Nam achieved High Human Development Status in 2021, signalling the country’s commitment to pro-poor growth, access to health services and education.

More progress is needed on some of the SDGs, for example gender equality and environmental protection. The sex ratio at birth in 2022 was 111.5 boys to 100 girls in 2022 as a result of the widespread practice of pre-natal sex selection. Women are under-represented in senior positions in government and the private sector, and domestic violence remains a serious issue. Marine and coastal ecosystems are vulnerable to over-exploitation and pollution from agriculture, industry and household waste.

By far the greatest development challenge facing Việt Nam is climate change. As a country with a long coastline and two low-lying delta regions, Việt Nam is often listed among the countries most vulnerable to sea level rise, floods, drought and extreme weather events. In the Mekong Delta region, rising sea levels and saline intrusion could force millions of people to relocate. Billions of dollars in investment will be needed to upgrade rural and urban infrastructure to protect communities from storms and floods.

Like other countries, Việt Nam has embarked on a long-term journey from fossil fuel dependence to renewable energy. The Government has pledged to achieve net-zero carbon emissions by 2050 and eliminate coal-fired power plants in the 2040s. The transition will deliver economic benefits including energy security and cleaner air, and Việt Nam’s green credentials will bolster export industries.

The investment effort required to achieve net-zero is measured in the hundreds of billions of US dollars. Mobilising finance on this scale is an unprecedented challenge. Traditional financial instruments like government bonds, commercial banks and overseas development assistance will not be enough. Việt Nam will need to innovate to create larger, deeper domestic financial markets and to use the government’s balance sheet to crowd in private investment, especially from the domestic private sector.

What are UNDP’s recommendations for Việt Nam to deal with those challenges in order to keep up the nation's remarkable progress that has been made over the years?

UNDP policy recommendations to Việt Nam and other countries is based on the principle that development should 'Leave No One Behind'. We support policies to achieve equality of outcomes and human development for all.

Việt Nam has demonstrated that rapid economic growth is consistent with a deep concern for equality. Since 2018, income growth for the poorest 40 per cent of households has been higher than average national income growth. The under-five child mortality rate in 2021 was 20.6 per 1,000 live births, less than half of the average of lower middle-income countries. Access to electricity and basic sanitation is nearly universal, even in remote areas.

Some problems remain. Food insecurity among ethnic minority children is stubbornly high at 32 per cent of children under five years of age. Elderly poverty is a rising concern, with 9 per cent of people over 65 years old living in poverty at the national poverty line and another 15 per cent vulnerable to poverty. Nearly half of elderly people are still in work and 90 per cent receive financial assistance from family members.

Social assistance programmes are in place to help poor and vulnerable individuals and households including children, the elderly and people living with disabilities. However, Việt Nam’s spending on social assistance at 0.7 per cent of GDP is low compared to the rest of the Asia-Pacific region. Benefit levels are also low, both in absolute terms and compared to other lower middle-income countries.

The Government’s Master Plan for Social Assistance Reform and Development (MPSARD), approved in 2017, identifies reforms to close these emerging poverty gaps, including expanding social pensions and child benefit. However, these innovations have not yet been funded.

UNDP proposes universal child benefit and social pensions as a policy to ensure that all Vietnamese citizens benefit from development and to build the resilience of households with young children and elderly members to manage income loss due to economic headwinds, health emergencies like COVID-19 and other risks.

Estimates compiled by scholars at the National Economics University indicate that universal child benefit and social pensions would be an affordable, effective means to eliminate poverty, build social cohesion and prevent widening inequalities from undermining Việt Nam’s development gains.

The transition to renewable energy will generate benefits but will also give rise to substantial economic costs for every activity, sector and region of the country. The aim of achieving a Just Energy Transition is to ensure that these costs and benefits are fairly distributed, and in particular that the living standards of the poorest and most vulnerable members of society are protected.

UNDP is working closely with the Government to understand the social and economic implications of climate change and the energy transition and to identify policies and programmes to protect vulnerable citizens and communities.

Việt Nam has determined to take drastic measures to not just recover the economy but also work hard toward development priorities. As a long-term development partner of Việt Nam, what is UNDP’s plan to support Việt Nam in achieving its goals?

UNDP works closely with the Government and other partners to support sustainable and inclusive economic growth, to help Việt Nam increase resilience to shocks and adapt to the effects of climate change and to promote improvements to the quality of governance and access to justice for Vietnamese citizens.

The Sustainable Development Goals and the principle of Leaving No One Behind motivate UNDP’s work in Việt Nam. We identify evidence-based policy options with the Government and other partners to help Việt Nam accelerate progress towards achieving all the SDGs. Gender equality and increasing economic opportunities for young people have emerged as priority issues for UNDP and other United Nations agencies.

As already noted, UNDP is engaged in work on social protection reform and achieving a Just Energy Transition. We also work with the Government to support efforts to make public agencies more responsive to citizens’ concerns and aspirations from central authorities to villages and towns. PAPI, a national survey of local governance and public administration, provides important insights on citizens’ needs and perceptions of public institutions.

The Vietnamese public is increasingly concerned about the quality of the natural environment. The 2021 Law on Environmental Protection and the decision on circular economy development in 2022 are important milestones. The new environment law brings Vietnamese concepts and regulations in line with international practice and provides a legal basis for carbon trading. Official endorsement of circularity will have important implications for domestic policies relating to solid waste management and for Việt Nam’s key export industries including textiles, footwear and electronics.

The experience of the COVID-19 pandemic has made us all more aware of the need to build resilience to disasters and climate change, health impacts, and economic risks such as financial crises or sudden weakening of external demand as we are experiencing at the moment. The capacity to anticipate risks and respond effectively is an essential function of government.