Positive Economic Changes

Minister Vu Duc Dam said: “As expected from the determination of the previous year to have higher economic growth and lower inflation, in the first 3 months, despite many difficulties, especially the long Tet holiday, growth rate is higher over the same period of previous year, 4.89 percent versus 4.75 percent. Inflation is restrained; in Quarter I the consumer price index (CPI) is lower from the same period of previous year”.

 

CPI in March reduced mainly due to the Government’s drastic solutions and policies directed by the Prime Minister on enhancing management of market prices, supply and demand, as well as on preventing smuggled, counterfeit and fake goods. However, reduced aggregate demand, slow consumption, increased inventories and pressure from imported goods, especially from the Chinese market, put heavy pressure on domestic goods.

 

According to the Ministry of Planning and Investment, interest rates were lowered in March. Exchange rates and exchange market remained stable; commercial banks’ liquidity was considerably improved; Government’s foreign exchange reserve increased; gold market gradually operated stably.

 

Export remains on the uptrend; so does import of production materials. In Quarter I of 2013, total export value is estimated to reach US$29.69 billion, up 19.7 percent over same period of the previous year, contributing remarkably to improving international balances of payments and Government’s foreign exchange reserve. Another positive sign is that in Quarter I this year, the Vietnamese enterprises contributed much to total export increase.

 

Registered and implemented FDI are higher from the same period of the previous year; and FDI is fairly disbursed. Processes of restructuring public investment were commenced right at the beginning of 2012 and have shown initial positive results. Social safety and people’s lives remain guaranteed.

 

“Over 60 percent of enterprises that stopped operation last year have now returned to their activities. However, the number of newly – registered enterprises is small, and a large number of enterprises still meet with difficulties. In general, Vietnam sees both positive signs and difficulties,” said Minister Vu Duc Dam.

 

However, the economy is still suffering many difficulties and risky challenges. Growth rates of agriculture, forestry, fisheries, industry and construction were lower over same period of the previous year. Production value of agriculture, forestry and fisheries in the first quarter 2012 increased 2.6 percent over same period of the previous year, value of poultry and cattle-breeding and aquaculture production was reduced. Industrial production is facing many difficulties. Index of Industrial Production (IIP) of Quarter I/2013 is estimated to increase 4.9 percent (5.9 percent from the same period of the previous year). Loan interest rates are still high compared to capital consumption capacity of enterprises.

 

Minister Vu Duc Dam said, in 2013, the Government continues closely monitoring the targets, and is not subjective with managing monetary, fiscal policies and prices because of the risk of returning inflation. “The Government has discussed and agreed to entitle ministries and industries with elaborating effective solutions on taxes. We have Resolution 02, several policies on reducing, stretching and exempting some taxes,” emphasized Mr Vu Duc Dam.

 

The Government is working diligently on solutions supporting enterprises. In the future, enterprises will be reduced corporate income tax and VAT. Solutions must ensure budget balance, reducing budget deficit but basically it must create more favourable business environment for enterprises.

 

To solve the difficulty of accessing capital for enterprises, it is targeted to reduce not only deposit interest rates but also loan ones. Now we have a base to require banks to continue reducing interest rates. The Government has discussed measures to realize the target and put inflation and cost of capital at a normal level. Although cost of capital is just part of total costs, it is difficult for us to compete if foreign enterprises has cost of capital of 5-6 percent, while for domestic enterprises it is about ten times higher.

 

The Government also discussed the project of establishing the Asset Management Company (AMC) of the Vietnam State Bank (SBV), this is one of many solutions to deal with bad loans. In discussion sessions, the Government continues commissioning the Finance Ministry, Ministry of Planning and Investment to work with SBV to clarify a number of issues. The Project has been approved by the Politburo, however many Government members are still doubtful that bad debts are solved with AMC establishment. The Project ends at handling with bad debts only among banks so Ministries have to continue working with SBV. And the Government requires Ministries to work closely so that the resolution on AMC will soon be issued, contributing to handling with loans.