The arrival of New Year is always a time of anticipation, expectation and taking stock..This New Year is special for my family as we spend our first Tet in Vietnam. I have heard a lot about the peach blossom, kumquats, banh trung and the importance of keeping the kitchen God happy, and I am looking forward to sharing in all of these traditions for the first time. But there are many other reasons to be optimistic and forward looking as Vietnam enters the year of the Goat, despite the challenging world situation in which Vietnam finds itself.

On the surface, world and regional trends do not look auspicious for Vietnam. The three major economies of the world -the US, EU and Japan- are all growing very slowly, if at all - such a coordinated downturn is uncommon, and will have an adverse impact on the overall demand for Vietnamese products. The access of China to the WTO is also an important challenge - competition with China’s exports in third markets will intensify, and a more liberalized market for services and compliance with various international standards will make China a more attractive destination for foreign direct investment. Additionally, Vietnam’s exports have confronted obstacles of various sorts. There have been cases against exports of frozen fish fillets to the US, of shrimp and gas lighters to the EU, and of garlic and waterproof footwear to Canada. And of course the threat of terrorism, which seemed confined to rich countries, has hit the region. For some time, Asia appeared as a safe heaven in an otherwise threatening world. But after the horrendous Bali attack, terrorism has come close – too close for comfort..

Opportunities for Vietnam

Despite these daunting challenges, there are many reasons to be more optimistic than ever regarding Vietnam as we enter the New Year. Firstly, exports to the important US market are growing at a fast pace. Garment exports, in particular, increased 16-fold between 2001 and 2002. The combination of trade liberalization, as with the Vietnam-US Bilateral Trade Agreement, and further opportunities for private sector development, could help Vietnam gain market shares and expand its exports, despite the sluggish growth of world demand.

Secondly, foreign direct investment to Vietnam has already proven resilient, with actual inflows actually trending upwards at a time when inflows to the rest of Asia were going down. Vietnam has signaled its intention to join the WTO. This would represent an additional boost to Vietnam’s competitiveness.

Thirdly, WTO accession would also provide a mechanism for Vietnam to deal with the obstacles to its exports. At present, those obstacles have to be confronted on a costly, case-by-case basis. Being part of the “club” will help Vietnam, as it will force its trade partners to play by the rules.

Fourthly, a study being jointly conducted by the World Bank and the IMF shows that the external debt situation of Vietnam is sustainable. The improvement in the grades given to Vietnam by risk rating agencies reflects a similar view.

Finally, this increasingly good perception of Vietnam by the rest of the world is also leading to a boom in tourism, despite the terrorist threat to the region. The government’s concern for social inclusion, and the respect of workers’ rights, also contribute to the image of Vietnam as a “decent” place to do business.

The challenges ahead

These positive developments are already showing up in a regain of economic dynamism. GDP is growing at around 6 percent this year, and could grow even faster over the next few years. The slowdown that followed the East Crisis seems something of the past. And yet, it would be a mistake to become complacent now.

To make this growth sustainable in the long term, Vietnam needs to complete its structural reform agenda. The key commitments have been made, through the Comprehensive Poverty Reduction and Growth Strategy and other important policy documents. Now the challenge is to implement the plans effectively, and to make sure that the phase of rapid growth Vietnam may be entering will be helping the poor people to improve their lives as in the phase that followed the start of doi moi. To do this, efforts to further expand the coverage and quality of education, especially among the poor and disadvantaed, and to reduce inequalities in health, are needed. Successful development needs to be inclusive: Everybody should benefit, and we should not forget the millions of disabled people in the country in this regard..

To deliver on its structural reform agenda, and on its social policy agenda, Vietnam has to improve its governance. Modernizing the legal system, strengthening the public expenditure framework, better aligning the public investment program with growth and poverty reduction objectives, and making public administration more efficient, are all part of this challenge. The foundations are being laid, and the international community will work with Vietnam to carry out the plans that will help Vietnam reach its objectives.

According to a recent survey Vietnamese people think that their country is doing better than most of the world, that their children have a bright future and are optimistic that life will be better five years from today. An overwhelming 98 percent of respondents said they expected that children of today in their country would be better off when they grew up - this was the most positive figure among any country surveyed globally. After only a few months in the country I share such optimism . The people of Vietnam will master their future. Join me in looking forward to the New Year with confidence and expectation.

Happy New Year!