World Bank urges Vietnam to get access to private financing for infrastructure

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World Bank urges Vietnam to get access to private financing for infrastructure

The World Bank, in a joint report produced with Vietnam's Ministry of Finance and sponsored by AustralianAid, has concluded that Vietnam can't rely on public money alone to fund its infrastructure projects and needs to enhance government access to private financing.

The report identified areas for the Vietnam's government to improve access to private investment in infrastructure. One of them is the development of a municipal development fund for secondary cities, which would act as a second-tier lender and strengthening the enabling environment for municipal bonds.

According to this report Vietnam has had an economic growth of around 7.3% between 1990 and 2010. This shift was also marked by a pursuit of fiscal decentralisation. This process of decentralisation resulted in duplication and waste, and was a major underlying cause of investment inefficiency.

According to local sources, Victoria Kwakwa, World Bank Country Director for Vietnam, stated:

"This challenge also represents an opportunity for Vietnam, in that a significant part of the investment needs can likely be met by more efficient use of available resources.

The success of any initiative to improve the financing of municipal infrastructure in Vietnam hinges on advances in the broader landscape of policy reform as part of the country's long-term development. Meeting these challenges requires a comprehensive approach that addresses issues of governance, financing, and execution."

Jennifer Sara, sustainable development sector manager at the World Bank, stated:

"Existing inefficiencies in infrastructure investment represents an opportunity for efficiency gains to do more with the same amount of resources. This calls for stronger use of market-based mechanisms - not only would this increase efficiency, but would also attract greater investor interest and participation from the private sector.

The sustainable financing of municipal infrastructure investment in Vietnam will require greater involvement of capital markets and the private sector, and cannot rely on state budget resources and official development assistance alone."

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