Economic Sector

Last updated: Thursday, April 18, 2019


Vietnam Economy to Embrace All FTA Opportunities

Posted: Wednesday, January 23, 2019

On the occasion of the Lunar New Year 2019 - the Year of the Pig, Vietnam Business Forum has an interview with Deputy Prime Minister Vuong Dinh Hue, Member of the Politburo, on economic achievements in 2018 and his forecasts of Free trade agreements (FTAs) opportunities in 2019. Le Hien reports.

Vietnam’s economic growth reached 7.08% in 2018, the highest in 10 years. What do you think about this?

Vietnam had a total victory on the socioeconomic development front in 2018, as it completed all 12 targets assigned by the National Assembly, with nine targets higher than their initial plans. Particularly, its economic growth was 7.08% in 2018, the highest in 11 years, twice that of the inflation growth of 3.54%. Last year, growth was seen in all three sectors of agriculture, industry - construction, and service. The domestic purchasing power grew by over 11% - a double-digit expansion that would have been difficult to have achieved in previous years.

Our higher growth was not driven by credit growth, public investment and mining industry as before, but by improved production performance, labor productivity, and economic competitiveness. In addition, continued macroeconomic stability has enabled us to effectively restructure the economy together with changing growth model and ensuring social security. This outcome resulted from the close direction of the Party Central Committee, firm administration of the Government and the Prime Minister and the effort of all-level authorities, branches, localities, the business community and people throughout the country.

Import and export is still important in the economy. Could you please tell us how Vietnam will be impacted by FTAs, especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?
FTAs are more beneficial to the Vietnamese economy than detrimental, as analyzed by most domestic and foreign experts. Currently, the "openness" of the economy is vast. In 2018, the export and import value of goods and services reached more than US$482 billion, doubling the size of the economy. Thus, any change of the world economy will affect our country. The continued economic growth and macroeconomic stability prove that Vietnam has utilized domestic strengths by adopting effective economic restructuring solutions and taking advantage of benefits from the world market.

In 2018, 29 export item categories each brought in at least US$1 billion, accounting for 91.7% of the country’s total export value, with five items each earning more than US$10 billion, accounting for 58.3%. The country took the all-times record trade surplus of US$7.2 billion, much higher than US$2.1 billion in 2017.

CPTTP comprises 10 major economies in the world, including Japan, Australia, Brunei and Singapore. The pact officially took effect on December 30, 2018. This FTA is very important to Vietnam as the bloc makes up 13.3% of global gross domestic product (GDP). In general, CPTPP benefits Vietnam’s economy, whose GDP can be added by 1.32%, exports by 4.04% and imports by 3.8% by 2035. The trade balance will be more favorable.

CPTPP will also help Vietnam restructure export markets in a more open way. Previously, Vietnam mainly exported to 10 major markets while, with CPTPP, the country can carry out the 10+ strategy, expanding its export markets to Mexico, Canada and Peru, and joining supply chains formed as the deal is in effect. Capital flows and value chains have shifted into ASEAN and Vietnam will take advantage of opportunities to draw more foreign direct investment (FDI). Especially, CPTPP places pressure onVietnam to complete its economic institutions and reduce poverty. According to the World Bank (WB), by 2030, CPTPP will help Vietnam free from poverty 0.6 million people who have income of US$5.5 a day.

Which exports of Vietnam do you expect to make breakthrough development in 2019?
As the export sector has been restructured, agricultural exports will grow strongly in 2019. In July 2018, during my visit to Brazil, the Brazilian Minister of Agriculture entreated me with a cup of delicious coffee at the Headquarters of this Ministry. I thought that it was Brazilian specialty but I was surprised to know that it was Vietnamese coffee. Despite intense competition, through this practice, I am sure that we will have many opportunities, not only coffee but also other agricultural and aquatic products. Not just Brazil but vast markets like Latin America, Africa and Europe need active engagement of businesses and active support from relevant authorities.

In 2019, exporting catfish to the United States will certainly increase strongly because, after being checked for quality, hygiene and safety, this export has met relevant American standards. We can compete on par in price and quality in the world's most demanding market. Moreover, by embracing CPTPP opportunities, Vietnamese apparel and footwear will thrive this year when preferential tariffs are introduced.

The Economic Committee of the National Assembly has warned that the Government's goal of having one million enterprises by 2020 is difficult to reach. Is the Government persisting with this goal?
In 2018, the country had 131,300 new enterprises with a total registered capital of VND1,478.1 trillion (US$63.7 billion), an increase of 3.5% in entities and 14.1% in value over 2017. However, 90,651 units were suspended from operation, representing a year on year growth of 49.7%, including 27,126 registered for definite business suspension, 25.1% more than a year ago; 63,525 closed for dissolution, up 63.4%; and 16.314 completed dissolution procedures, up 34.7%. Obviously, the goal of having one million effective businesses in 2020 is a tough challenge.

In order to achieve this target, it is essential to increase new business startups and the Government also aims to reduce 30-40% of enterprises pending for closure or dissolution. The Government assigned the Ministry of Planning and Investment to launch a scheme on converting individual business households into corporate entities with easy business registration procedures, especially simple accounting regime for small businesses. Meanwhile, tax agents are allowed to provide tax advice for micro and small businesses.

Therefore, we must make a great effort to reform administrative procedures, substantially improve the investment and business climate and facilitate trade for enterprises in 2019. We must perfect the startup ecosystem and advance robust innovation all over the region and the whole country. The Government will direct the publication of the Vietnamese White Paper to promote this policy.

The Government has also submitted to the National Assembly amendments and supplements to the Law on Corporate Income Tax with very preferential tax rates for micro, small and medium-sized enterprises transformed from registered business households; and strongly implemented the Law on SME Support. Vietnam now has 5.2 million registered business households and, if all solutions are implemented in all localities, focusing on converting business households into enterprises, the target of one million enterprises in 2020 will be possible.

2019 is a year of acceleration for completion of the 5-year development plan in 2016 - 2020. In which fields would you say we need breakthroughs?
Party General Secretary cum State President Nguyen Phu Trong assigned the Government, ministries, central branches and local governments to do better in all aspects in 2019 at the Cabinet Online Meeting in late 2018. More specifically, the Government's Resolution 01/NQ-CP of 2019 clearly defined the guiding principle “Discipline, integrity, action, creativity, breakthrough and efficiency” with eight task and solution groups, 45 issue groups, detailed into 188 projects. In my opinion, 2018 was a banner year of the 2016-2020 period and 2019 will be the year of breakthrough for the whole country to fulfil targets and criteria by 2020, assigned to the Government by the Party and the National Assembly.

To make breakthroughs, it is necessary to focus on further improving the business and investment environment, accelerating economic restructuring, changing growth models, making further changes in the implementation of strategic breakthroughs, pushing forward effective scientific and technological application, applying consistent solutions to more strongly develop the domestic market, open up capital for infrastructure investment, bring into play major roles of key economic regions; piloting the implementation of smart urban and green urban models; completing policies and mechanisms matching new economic models such as economic sharing, cashless payment and new payment methods.

The direction is very clear and the goals are very specific. What matters most is the need for outstanding effort, willpower and resolution to make breakthroughs, especially in implementing bodies in all sectors at all levels, create motivations and uphold responsibility of each individual, especially unit leaders, in carrying out economic development tasks together with cultural, health and education development tasks.

Thank you very much!

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