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Dinh Vu

Economic Sector

Last updated: Friday, October 19, 2018


Seeking Economic Growth Model for 2018

Posted: Tuesday, November 07, 2017

The Central Institute for Economic Management (CIEM) recently hosted the Forum on “Policy solutions to remove bottlenecks and create new motivations to promote transformation growth model” in Hanoi to find the best model and suggest solutions to remove bottlenecks for the economy to generate new growth momentum in 2018.

More policy solutions needed
Dr Nguyen Dinh Cung, Chairman of CIEM, said that recovered economic growth and improved production make the target GDP growth of 6.7 per cent highly possible this year. The country’s gross domestic product (GDP) expanded 6.41 per cent in the first nine months of 2017, of which the growth rates in the first and second quarters were 5.15 per cent and 6.28 per cent, respectively. The brightened economic landscape of Vietnam in the first nine months of 2017 illustrated timely and effective solutions of the Government and drastic actions of concerned agencies and localities.

He pointed out that Vietnam’s current growth pattern still needs strategic policy solutions to spur development. Accordingly, it is important to balance the overwhelming share of the foreign direct investment (FDI) sector in trade balance, as well as the gross national income (GNI) growth which is lower than the GDP growth.

As for institutional reform, business environment improvement and business support, the Government needs to press ministries and branches concerned to reduce by at least a third business conditions and eliminate at least a half of commodities subject to specialised import and export inspection and to basically change State management, Dr Cung proposed. For its part, the business community needs to seriously adopt cost reduction measures like cutting borrowing costs, logistics costs, trade union costs, social insurance, unemployment benefits and severance allowances. Salary increase is based on employee performance rather than administrative orders.

2018 is the year of business cost reduction
Concurring with Cung’s viewpoints, Mr Nguyen Tham, former Vice President of the Vietnam Logistics Business Association (VLA), said, there is more than one way to remove mechanical bottlenecks, but it is extremely difficult to do it with the economy. Group interests, “backyard” interests and sub-licence removals are pressing economic matters.

According to the World Bank (WB), the official cost of carrying a 40-foot container from Vietnam to Los Angeles (United States) is US$2,532. But, the informal cost amounts to US$572 for a container, used for facilitations. And, Vietnam is incurring exorbitant transportation costs, which make up 30 - 40 per cent of product costs, compared with just 15 per cent in other countries.

Remarking on “blood clots” of the Vietnamese economy, Mr Dang Quyet Tien, Director of the Corporate Finance Department under the Ministry of Finance, said that the slow-moving equitisation and divestment in State-owned enterprises (SOEs) is caused by avoidance thinking. Only 34 companies were approved for equitisation in the first nine months of this year. SOEs divested VND3,838 billion and collected nearly VND16 trillion of proceeds. In the financial sector alone, SOEs are not very serious with equitisation and divestment. Up to 176 SOEs in this sector have not agreed to be transferred to the State Capital Investment Corporation (SCIC).

After integrating all comments, Dr Nguyen Dinh Cung suggested reducing business costs, narrowing GNI and GDP gap, reforming business environment, cutting logistics costs, restructuring SOEs and facilitating all economic sectors to develop to a sustainable growth scenario for the 2018 - 2020 period.

Anh Phuong

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