Vietnam Economic Restructuring: Golden Chance for Businesses?

The master plan aims at creating a system of reasonable, stable and long-term stimuli, especially tax incentives and other investment-encouraging measures, promoting the distribution and use of social resources for sectors and products of competitive advantages, improving labour productivity and competitiveness. The plan aims at forming and developing a rational economic structure on the basis of improving and upgrading development levels of sectors, fields and economic regions; development industries using high tech, creating high value-added sectors to gradually replace low-tech, low value-added ones to be key economic sectors.

 

To achieve the above objectives, the Government will focus on, first, applying prudent and efficient monetary policy. A favourable and stable macroeconomic environment will be maintained, in which monetary policies will be realised effectively and carefully; their instruments exploited flexibly in close combination with fiscal policies in order to curb inflation, secure macro stability and a sound growth rate in line with the country’s specific socio-economic conditions in certain periods.

Besides, Vietnam will apply tight, effective and drastic fiscal policies to boost up thrift while expanding exports and tightly controlling import of discouraged items.

 

The second focus is to renew distribution and use of capital. The Government plans to mobilise different resources for development investment, so that the total investment accounts for 30 - 35 per cent of GDP and State investment holds 35 - 40 per cent of the total investment. About 20 - 25 per cent of total budget will be spent on development investment. The Government will manage to maintain key economic elements at reasonable rates, especially savings, investment and consumption, state budget, balance of trade, international balance of payments, public debts and national foreign loans. Scope and opportunities will be expanded for private investors, especially domestic investors, who are encouraged to use resources for infrastructure, potential industries and products, and dynamic economic zones.

The third focus is to clear bad debts. In the 2013 - 2015 period, the Government will concentrate on making credit institutions’ financial status healthier by settling their bad debts, developing major business activities, securing liquidity and sustainable development, and increasing transparency in operations of these entities.

The fourth priority is to reshuffle State-owned enterprises (SOEs). SOEs will be classified and reorganised. Equitisation will be promoted in SOEs where the State’s entire ownership is unnecessary.

 

In fact, the above solutions or part of such solutions have been applied quite drastically by the Government in recent times and produced positive changes to the economy.

 

However, according to many experts, the Government should continue perfecting fundamental contents of the master plan and introduce detailed objectives. Not all ideas and requirements of the plan are perfect but they need further analysed for perfection. The Government also urgently needs to work out specific action programmes with policy solutions, steps and enforcement priorities. In addition, very drastic actions are immediately needed so as to achieve significant results in economic restructuring in 2013 and 2014, specially with SOEs, banks, and public investments. Then, it will really create the confidence of the business community and the entire society.

 

Especially when a system of new driving forces is created, a new enforcement mechanism is needed to ensure existing resources and effective allocation.

 

Tran Dinh Thien, director of the Vietnam Institute of Economics, said: The scheme’s objectives are broad and covering many aspects. They aim at changing the entire model of economic growth, expressing determination to make a radical change to economic development methods. However, the scheme must clearly identify "the coordinates of fire" to focus its actions on. The coordinates, in my opinion, are the system of resource allocation in the economy.

 

Do Manh Hung, a congressman in Thai Nguyen province, said: the economic restructuring plan aims at an industry powered by high tech, agriculture with globally competitive products, and services that please everyone but if we do not have sufficient manpower, the plan will become infeasible. Hence, importantly, the scheme must clarify human resource attraction and training mechanism.

 

With a series of solutions that the Government has introduced, especially SOE restructuring, the private sector will have a fair opportunity to access business resources like capital, land or technology. So, how will they grasp this opportunity to speed up?

 

As many as 100,000 companies went bankrupt in the past two years, equivalent to the total number of bankruptcies in 20 years before that. To a certain extent, this is a grim natural refinement. Existing companies also draw very valuable lessons. Even, many have proven their competitiveness in the tough time and consider it a golden opportunity to get a move on.

 

However, economic restructuring plan is not a magic wand for businesses to make a makeover. To absorb reallocating resources, enterprises must boost up their capacity and level to utilise the moving process of business resources. Companies themselves have to restructure to grasp new opportunities. And, such opportunities only come to well-prepared and proactive enterprises.