What are the objectives of Lars Thunell’s visit to Viet Nam?

Viet Nam has been a target for IFC private sector investment and advisory services for nearly 15 years and we see potential for much greater economic growth and prosperity, but also important challenges ahead. To help support Viet Nam’s transition to a more market-based economy, IFC expects to double its investment and advisory services over the next three years.

Mr. Thunell’s visit is testament to IFC’s commitment to Viet Nam. This is Thunell’s first trip to Viet Nam since being appointed Executive Vice President and head of the IFC in January of this year. The overall objective of the trip, which will include stops in HCM City and Ha Noi, is to re-emphasise IFC’s commitment to Viet Nam and further explore opportunities where IFC can play an even greater role in helping the country meet the challenges of its rapidly growing economy and increasing integration with international markets.

What will be discussed during Mr. Thunell’s meetings with senior officials and businesspeople in HCM City and Ha Noi?

In all of Mr. Thunell’s meetings, he wants to hear what challenges are faced by both the government and the private sector, and also gather their views on how IFC can help meet these challenges.

Moreover, to help develop much-needed infrastructure and reduce the government’s share of the cost, IFC can help bring together public-private partnerships. As Viet Nam opens the infrastructure sector further to private investment, IFC can combine its private sector financing capacity with the World Bank’s public sector lending and policy expertise to create innovative solutions.

In July 2006, Viet Nam’s government appointed IFC as lead advisor in mobilising private sector participation in electricity generation projects. This draws on IFC’s global advisory and commercial investment experience, as well as our nearly 15 years of work in Viet Nam. In helping structure an efficient framework for international investments in the power sector, IFC will also lay the groundwork for investments in other sectors such as ports and telecommunications.

How can IFC help Viet Nam leverage its competitive advantages?

IFC’s priorities for Viet Nam include investments and technical assistance in sectors where domestic demand is growing, or where the country has a comparative advantage. Examples would include labour-intensive manufacturing, agribusiness, tourism, and information and communication technologies.

We believe that Viet Nam’s private sector can benefit from five key enablers: (1) long-term financing that will enable successful enterprises to upgrade and expand, and SOEs to equitise; (2) more and better infrastructure to facilitate production and trade; (3) a level-playing field with fair competition in doing business; (4) social, environmental and corporate governance practices that meet international standards, and 5) a business environment that facilitates sustainable private enterprise development and encourages public/private dialogue and private sector advocacy.

After 50 years’ work in emerging markets worldwide and nearly 15 years in Viet Nam, we have a wealth of global and local experience to share in helping Viet Nam to meet these five challenges.

First, we provide long-term financing and can help attract other international providers of long-term financing. Having IFC investment helps to open doors in overseas markets and gain licenses to innovative technology. We offer investee companies access to our worldwide and local network of experts to resolve operational and other problems.

Second, IFC has worldwide experience bringing public and private partners together to finance infrastructure development and ensure that these meet the highest social and environmental standards.

Third, based on the high standards IFC has been using for decades in judging all of its investments, we can help companies meet the social, environmental and corporate governance standards increasingly required in both overseas markets and in Viet Nam.

Fourth, we have years of experience working on improvements to the business environment through public-private dialogue and advocacy.

What global practices can IFC share with Vietnamese companies?

IFC has been supporting Viet Nam’s transition to a more market-based economy by financing and advising private sector companies since 1992. To date IFC has provided nearly $500 million in financing to more than 25 companies in a wide range of sectors, including finance, healthcare, education, information technology, manufacturing, and agribusiness. To support private companies too small for direct financing, IFC has invested in banks and investment funds that in turn finance smaller enterprises.

Worldwide, IFC is recognised as a global leader in promoting sustainable social and environmental best practices within the private sector. An excellent example is the Equator Principles, based on IFC’s social and environmental performance standards, which has been adopted by a group of about 40 financial institutions that together represent more than 80 percent of global project financing.

In the financial sector, IFC seeks to help Viet Nam’s government upgrade the capacity of state-owned commercial banks and insurance companies. This would build on IFC’s pioneering work with the country’s joint stock banks. IFC is a shareholder in Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) and Asia Commercial Joint Stock Bank (ACB), Viet Nam’s two largest private joint stock banks.

IFC is also an early investor in an offshore fund, Viet Nam Enterprise Investments Limited; this is now the largest Viet Nam fund and the fastest-growing in net asset value.

Finally, the Mekong Private Sector Development Facility (MPDF), IFC’s multidonor-funded technical assistance initiative, has been working in Viet Nam, Cambodia, and Laos since 1997 to reduce poverty through sustainable private sector development.

MPDF works through six interrelated programmes that seek to improve the business environment; develop the financial sector; improve managerial capacity; and increase sustainable business practices in tourism, agribusiness, and the garments sectors that are central to economic growth and poverty reduction. IFC also manages the Viet Nam Business Forum, a structured public-private dialogue aimed at improving the business environment.

What has IFC done to help improve the business environment in Viet Nam?

In collaboration with the World Bank, IFC is helping the government improve the business environment. IFC facilitates public-private dialogue through the Viet Nam Business Forum, and through MPDF it works to develop private sector advocacy capacity.

IFC-MPDF continues to be an important resource for the government as it implements the new investment and enterprise laws. For the past three years, the Facility has worked closely with government drafting committees by providing them with research on global best practices, technical experts to review draft legislation, nationwide dissemination of information and feedback from stakeholders, and comprehensive briefings for legislators. Recently the Facility has been supporting the government in developing implementing decrees for both laws and ensuring the private sector voice is heard by those developing the decrees.

Another example is the Bac Ninh Provincial Simplification Project, another IFC-MPDF initiative, which has identified ways to simplify or remove administrative and regulatory barriers that impede business at the local level. The project encompasses a review of local administrative procedures to start and operate a business, with emphasis on business registration and licenses.

What can IFC do to help Viet Nam accelerate its integration into the global community?

Viet Nam’s current pace of integration into the global marketplace has been very impressive. Key recent achievements include bilateral trade agreements, expected entry into the WTO in the coming months, boost in FDI and tourist numbers, and the hosting of the APEC Summit in November this year.

As Viet Nam is well aware, increased integration demands increased competitiveness among Viet Nam’s markets, the business environment, and private sector firms. Through its investments and other activities, the IFC maintains its commitment to play a greater role to help Viet Nam in this broad task of strengthening the country’s competitiveness, specifically that of its private sector, and thus assist the country’s continued and successful integration into the global economy. —VNS