Vietnam has recently achieved many impressive successes, but is also facing many difficulties such as slowing growth rate, difficulties in the banking system and real estate market, and inefficient operation of some state-owned enterprises. This is the opinion given at the "Vietnam maintains stability, enhances competitive advantage and reaps growth potential" workshop held by the State Bank of Vietnam in cooperation with the International Monetary Fund (IMF).
Recommendations of the IMFAccording to Mr Alfred Schipke, an economic expert from the IMF, facing domestic and international economic instability which is having a strong impact on the economy, Vietnam should speed up the restructuring process. Only when this process is underway can Vietnam move forward to a new economic position. To this end, Vietnam should exploit economic growth potential and competitive advantages, and improve market position. Mr Alfred Schipke also pointed out that Vietnam is implementing an open strategy of the market and positively integrate into the market. Accordingly, Vietnam is attracting a large amount of foreign investment flows of ODA, FDI and enjoying high export growth rate. In particular, when the partner countries approve the Trans-Pacific Partnership agreement (TPP), which is not far ahead, this opportunity will bring more benefits than expected.
According to Mr Alfred Schipke, an economic expert from the IMF, facing domestic and international economic instability which is having a strong impact on the economy, Vietnam should speed up the restructuring process. Only when this process is underway can Vietnam move forward to a new economic position. To this end, Vietnam should exploit economic growth potential and competitive advantages, and improve market position. Mr Alfred Schipke also pointed out that Vietnam is implementing an open strategy of the market and positively integrate into the market. Accordingly, Vietnam is attracting a large amount of foreign investment flows of ODA, FDI and enjoying high export growth rate. In particular, when the partner countries approve the Trans-Pacific Partnership agreement (TPP), which is not far ahead, this opportunity will bring more benefits than expected.
Regarding specific measures, Mr Alfred Schipke said that the policy makers in Vietnam are facing many challenges such as conflict of policy objectives, lack of independent operations, inefficiency of monetary policies due to vulnerable banking sector, and low foreign exchange reserves. The IMF therefore recommended that to achieve the desired monetary policy, Vietnam needs to simplify further tasks by setting prior policy goal of low and stable inflation. If necessary, rates can be let float, then adjusted by increasing flexibility (extending exchange rate). In addition, information on monetary policy should be more transparent. In addition, Vietnam also needs to maintain the target of macroeconomic stability, combining with the task of accelerating economic restructuring with three economic pillars including public investment, state-owned enterprises and banking and financial system.
The key of institutional reforms
According to Ms Nguyen Thi Hong, Director of Monetary Policy Department of the State Bank, in the time to come, to partly solve difficulties of the economy, the State Bank will continue to implement monetary and credit solutions aimed at removing difficulties for production and business. However, we should not be subjective about inflation. The State Bank said that the current domestic economy and the world will still suffer more complex and unpredictable fluctuations. Therefore, the State Bank will continue to target priority determination to curb inflation, ensure macro-economic stability and economic growth at a reasonable level. The monetary policy measures implemented in 2013 will stick to macro-economic conditions, particularly the inflation index. An IMF study shows that the growth of Vietnam's economy depends mainly on the non-monetary factors. Therefore, in the coming time, in addition to monetary measures and bank credit that the State firmly implements, fiscal policies must also be implemented more aggressively.
However, according to Dr Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management, the biggest challenge of Vietnam does not lay on the economy but on institutional issues. Institutional reform is the key. Dr Thanh stressed that Vietnam clearly has more than 6 years of integration into the WTO, which means Vietnam's economy is forced to further integrate into the world economy with a series of bilateral and multilateral trade agreements. However, the issue is that Vietnam still does not seem to adapt to the new environment, so everything is delayed. Vietnam has not fully assessed the risks and precautions when participating in this global playground. Therefore, the objectives set out for Vietnam is to adopt institutional reforms to enhance transparency, accountability, explanation ability, and most importantly to catch up with the world’s development. Currently, Vietnam is holding high expectations on goals such as macroeconomic stability, but at the same time desiring higher growth and institutional reform with three main pillars including banks, state enterprises, and public investment. Vietnam is actively negotiating in international trade agreements and tending to adopt political reform through constitutional amendment. This will be very difficult unless the process is done step by step, said Mr Thanh.
In addition, Mr Thanh pointed out that the Government of Vietnam is also very active in amending the Constitution. If looking at the economic aspect, this is also a good opportunity, if Vietnam decides to remove the weaknesses in the overall economy under constitutional principles.
Anh Phuong
Vietnamese
