Donors pledge record $5.43 bln in aid to Vietnam

HANOI (Reuters) - International donors on Friday pledged a record $5.43 billion in aid to Vietnam for 2008, raising commitments by more than a fifth from this year to help the country improve its infrastructure and sustain high growth.

The donors urged Vietnam, which became member of the World Trade Organisation in January, to maintain strong economic expansion it needs to become an industrialized nation.

"Vietnam needs to consolidate its socioeconomic development to continue to grow to become an industrialized nation, rather than to be caught in the middle income country trap," the Asian Development Bank said in a statement.

"It would be particularly important to focus on the acceleration of necessary reforms and to develop necessary infrastructure," the lender.

Among the pledges, the ADB's is the largest at $1.35 billion, up from last year's $1.14 billion. Japan and the World Bank each promised $1.11 billion and the European Union countries promised a combined $962.8 million.

More than half of the aid would go to infrastructure development such as roads, ports and power plants, World Bank Vietnam director Ajay Chhibber said.

The aid, announced at an annual meeting between government and donors, would be part of Vietnam's ambitious plan to reduce poverty and boost economic growth to up to 9 percent in 2008 from the 8.5 percent expected this year.

Planning and Investment Minister Vo Hong Phuc said the country needed to tackle a host of new issues related to swift economic expansion, including high inflation, the widening income gap and the environment.

Phuc also pledged to address issues raised by donors such as corruption and the need to train the labor force as Vietnam moved away from labor-intensive to more high-tech industries.

Vietnam began its shift from a centrally planned economy 20 years ago, but the economy of this Southeast Asian country of 85 million people remains relatively small with gross domestic product this year estimated at around $65 billion.

Corruption, lack of transparency and implementation of new laws were among the challenges Vietnam faced in trying to achieve its goal of gaining middle-income status, or an annual per capita income of more than $1,000 in the next few years.

(Reporting by Nguyen Nhat Lam; Editing by Tomasz Janowski)