Long-term Growth Ambition Face Difficulties

Delivering an opening speech, MPI Minister Vo Hong Phuc said that the Vietnam economy is facing a lot of challenges as inflation in the first months of this year accelerated above 12 percent while trade deficit exacerbated and banking system operated in hard conditions. The Government of Vietnam issued the Resolution 11 in late February 2011 to deal with these matters. The Resolution 11 specified measures to stabilise the macro economy, maintain growth at reasonable pace, and ensure social security. “The Resolution 11 has yielded initial results but exposed some matters that need further discussion to guarantee the achievement of the socioeconomic plan set for 2011,” said Minister Phuc.

 

He said that, through this VBF meeting, the Government of Vietnam wanted to hear the business community to discuss problems and solutions related to macro-economy, fiscal and monetary policy and social security among others in order to fulfil targets in 2011.

 

Dr Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), noted that the Vietnam’s economy has faced up with numerous difficulties since the beginning of 2011. However, the Government quickly responded, adopted aggressive measures, and enjoyed spectacular successes: Exchange rate strains on the foreign exchange market are resolved; dollarization eases; and tightened fiscal policy aiming at public investment reduction made positive signals.

 

“The business community is acutely aware of the importance of macroeconomic stabilisation measures and is actively joining hands with the Government in austerity measures. According to a recent survey by the VCCI, over 30 percent of private companies have reviewed their projects to cut inefficient ones and nearly 50 percent of enterprises have planned to restrict imports under the spirit of the Government’s Resolution,” said Mr Loc.

 

He said that if public investment and spending is not carried out drastically, manufacturing areas will have more credits for development. Specially, it is necessary to have policy that will encourage banks to lend small and medium-sized enterprises (SMEs), expand and upgrade the efficiency of credit guarantee funds, and set up SME development fund soon, etc.

 

Speaking of inflationary issues, Deputy Governor of the State Bank of Vietnam Nguyen Van Binh said that macroeconomic stability is the foundation for Vietnam to enter a new stage of development where the focus is to change economic development model in the direction that focuses on in-depth and effective development. Vietnam cannot accept too high interest rates but it cannot let the rates be too low in the context that inflation has accelerated to a double-digit rate, said Deputy Governor Binh.

Mr Alain Cany, Chairman of the European Chamber of Commerce (Eurocham) expressed his optimism of business prospects in Vietnam although it is in the down trend. However, according to Mr Alain, Eurocham’s members are now worried about high inflation and continued devaluation of Vietnamese dong.

 

Eurocham’s member companies also care about infrastructure and energy supply. Power outage in each company last year nearly doubled that in 2009, thus, Mr Alain, suggested Vietnam should speed up the development of a competitive electricity market before 2015 instead of 2024.

 

Mr Christopher Twomey, Chairman of the American Chamber of Commerce in Vietnam (AmCham), said: Vietnam has achieved certain successes in attracting foreign investment on the expectations of investors about stable economic and political background. However, since 2008, the country has continually faced inflationary threats and impacts of global financial crisis.

 

“Prolonged trade deficit, declined foreign currency reserves and credit ratings downgrade in couple with continuous devaluation of the local currency have highlighted the need for policy reorientation,” he said.

 

He noted that Vietnam needs to have longer term solutions to heal fundamental weaknesses of the economy.