Last updated: Thursday, March 05, 2015
3 Major Areas Need RestructuringPosted: Thursday, January 17, 2013
Those include public investment, the system of commercial banks and financial organizations and state economic groups and general corporations. This is the idea of Dr. Pham Viet Muon, Deputy Head of the Government Office and Deputy Head of the Standing Steering Committee for Business Renovation and Development, at the international conference “Vietnam Economy Perspectives and Strategic Thinking for Senior Executives (2013 – 2015)” recently held in Hanoi.
Difficulties which affect Vietnam
Vietnam enters the development period of 2011 – 2015 in a context in which the world is undergoing rapid, complicated and difficult-to-anticipate changes. Consequences of the global financial crisis and economic recession in the period of 2007 – 2009, budget deficit and public debt crises in such large economies as the USA, EU and Japan, could possibly force the global economy into a double-dip recession unless appropriate solutions are sought.
International and national financial organizations agree that the global economy will continue to face many obstacles in the time to come. Forecasts of international and domestic organisations point out that global and regional economic growth will slow down and be lower than that prior to crises. Risks to global economic recovery process are potentially huge. The growth rate of global economy in 2012 is higher than that of 2011, but still lower than before the crises. The growth rate in 2013 may be better but not significant.
World trade is expected to recover slowly while trade protection and trade disputes tend to increase. Particularly, world trade activities will reverse to emerging economies with highest trade growth rate.
Notably, ODA supply shows signs of decrease since national economies of major donors are currently facing difficulties due to high national debt, while demand for ODA to assist developing nations, especially less developed nations and countries with unstable politics, keeps growing in recent time. In addition, sponsors tend to give more priority to less developed countries. ODA supply for countries with average income will, therefore, continue to be reduced in the coming time
According to Dr. Pham Viet Muon, FDI is showing a movement trend in favour of East Asia, including Vietnam, if Vietnam can grasp it in time and has appropriate mechanisms. A number of investors have started to navigate their investments from China to other countries in the region in order to minimize risks and to avoid increasing cost due to increasing wages in China. That ASEAN and China become free markets also helps to support the policy to move part of manufacturing establishments of FDI enterprises in China to ASEAN countries. Vietnam has the advantages of being in a market which comprises of some 1.2 billion people (600 million people in Southern China and 600 million people in ASEAN countries) and being favourably connected to ASEAN countries and provinces in southern China via airway, seaway and road transport. If its infrastructure system is better developed, Vietnam will have the possibility to become a supply centre for the whole region, transnational corporations and FDI enterprises.
Mr Muon believes that the impacts of the global financial crisis, global economic recession, adverse evolution of the world economy due to government debt crisis, high inflation in recent time and weaknesses of national economy accumulated through many years will affect national development. Irrational economic structure, poor quality, low effectiveness, weak competitiveness and low growth rate of the economy, HR quality and infrastructure, etc. are still bottlenecks in development.
Solution to the relationship of growth and quality of development
To deal with the above situation, Mr Muon believes that it is necessary that the role of the State be further improved in creating and regulating development of the socialist-oriented market economy; effectiveness of state administration continue to be renovated and enhanced on the basis of respecting and strictly applying regulations and principles of the market economy and regarding market demand, mechanism, effectiveness and benefits as the major foundation for allocation of resources to development and having measures to prevent and overcome limitations and flaws of the market economy.
Accordingly, the goals are rapid and sustainable economic development associated with renewal of the growth model and restructuring of the economy in the direction of improving quality, efficiency and competitiveness. The average GDP growth rate in 2011-2015 will fall between 6.5-7 percentage per annum; CPI growth rate, drop to 5-7 percentage per year by 2015; budget deficit, less than 4.5 percentage and the trade gap, equivalent to ten percent of export turnover. 2013 is estimated to witness a GDP growth rate of 5.5 percentage, an increase of ten percent in import turnover, the trade gap being equivalent to eight percent of export turnover, budget deficit not exceeding four percent and CPI around eight percent.
To achieve the above results, Mr Muon said, “First and foremost, it is necessary to implement synchronous monetary and fiscal policies; strictly exercise reduction and management of public investment, create favourable conditions for business and production; provide assistance to important industries and fields and highly competitive and effective enterprises. In the following years, special attention needs to be paid to directing and well implementing solutions and orientations so as to renovate the growth model and restructure the economy.”
Moreover, Mr Muon believes that the restructuring of the economy must be linked to the renovation of the growth model, while improving quality, efficiency and competitiveness; and this must be done in a synchronous manner in all industries and sectors nationwide and at every locality and organization over many years. It is pivotal that three most important areas be focused on, including restructuring of investment (public investment); restructuring of financial market (system of commercial banks and financial organizations) and restructuring of state owned enterprises (economic groups and general corporations).