Vietnam Economy: Long Sight and Short Sight

Mr Nguyen Van Giau, Chairman of the Economic Committee of the National Assembly (ECNA), expressed his concerns over the status of the national economy. “How can we return to the period of rapid growth?" he said at the Autumn Economic Forum and the recent plenary session of the Economic Committee of National Assembly held in Hue City. Meetings with experts, economists, and ECNA colleagues are the basis for him to complete reports on social and economic inspections of the Government at the ongoing congressional meeting. Unfortunately, all his three questions are yet to be replied.

 

The presentation on lacklustre outlook presented by Director of the Vietnam Economic Institute Tran Dinh Thien was not controversial as earlier. Economists shared his standpoint that Vietnam’s economy has fallen into a growth congestion trap as all three driving forces of domestic growth, namely State-owned enterprises, private enterprises and rural areas, have exhausted and lagged far behind. Regardless of official discussions or sideline talks, top scholars in Vietnam also shared those perspectives. “To date, I do not see any response,” Mr Thien added.

 

Indeed, the current economic situation is partially resulted from corollaries when Mr Giau was the Governor of the State Bank of Vietnam (SBV). At that time, credit growth rate was at a record of 54 percent in 2007 and 38 percent in 2009. This stimulated greed, speculation and investment of market players and inflated the asset bubble to a level that is rarely seen to any Vietnamese people. Now, the bubble has burst out.

 

This reason played a minor part but it was like a drop of water that caused a spill-over of a glass of water. Like other specialists as well as authorities, Mr Thien said the main reason is the institutional cloak is tight and obsolete. Market economy thinking is not present in all areas, from policy making and resource allocation to and business operation. He added that “Institution relates to the clarification of “socialist orientation" concept in market economy development. To date, we have not had a clear answer to the question “How does "socialist orientation" impact - promote or inhibit market?” Furthermore, “why do we need to constitutionalise the leading role of State economic sector?” is also a question for many.

 

Unfortunately, what is deemed very serious that enthusiastic persons like Mr Thien still has no answer. Even the socioeconomic situation investigation report led by Mr Giau sent to the legislative National Assembly only focuses on short-term analysis. The report said: "Many in the Economic Committee of the National Assembly say the socioeconomic situation is still facing tough difficulties and challenges. Perhaps, objectives and tasks set out the Resolution of the 11^th National Party Congress and the five-year 2011-2015 plan of the National Assembly are likely to miss. Easing inflation, declining imports, insignificantly improved trade deficit are not the signals of robust economic recovery. Annualised economic growth averaged 5.6 percent from 2011 to 2013, the lowest level in 13 years and far below the expected growth of 6.5 - 7 percent.” This means the above analyses and comments at the National Assembly are only for short term.

 

The Government’s report sent to the National Assembly is not that pessimistic. For example, it says that the business environment continued to improve, registered foreign direct investment (FDI) rose more than 36 percent, the index of industrial production (IIP) increased 5.4 percent, inventories of processing and manufacturing sectors tended to decline sharply, exports were estimated at US$96.5 billion, up 15.7 percent year on year. All these data in the first nine months of this year were higher than a year ago. Although the Government’s report focuses on short-term issues and stirs controversies amongst lawmakers, Prime Minister Nguyen Tan Dung has also expressed his worry about long -term issues that Mr Thien and other economists put forth. In his speech to the National Assembly, Prime Minister Dung said “Awareness on a number of issues on development policy and perspectives remains different, lead to hesitant and inconsistent institutional reforms and policies on a number of issues, such as the role of the State and State-planned economy within a context of market economy, protection of people's sovereignty, ownership and land use rights, prices of essential goods and public services. These issues have not created any breakthrough to strongly mobilise all the resources for development.” It seems that institution is constraining him and his subordinates.

 

Not a few congressmen expressed their deep sharing and sympathy. Deputy Truong Trong Nghia of Ho Chi Minh City delegation said at a group meeting on socioeconomic situation that “I think the way the National Assembly keeps questioning the Government is not reasonable. This is probably not the only story of the Government. To change, we must suffer pains.”

 

He proposed setting up a national committee in charge of restructuring attended by the National Assembly, independent consultant institutions and independent professionals with clearly defined working regulations and certain power. In this committee, expected to start operation in 2014, the Government acts as a permanent body but the participation of institutions, economic research institutes and specialists is required. For example, he said, the restructuring of the Electricity Group of Vietnam (EVN) will never end in success if this group does this job on its own. “If external hands are not allowed to get involved, economic restructuring will be impossibly done. Everything remains unchanged from tenure to tenure. Vietnam is still a Vietnam of decades ago.”

Remarks by Mr Nghia, Mr Thien and many others have been unfortunately not analysed and dissected carefully while the process of resource allocation continues to be misled. Till now, Chairman of the Economic Committee of National Assembly Nguyen Van Giau seems to find part of an answer that he has put forth thrice before the ongoing National Assembly meeting opens. His report to the National Assembly asserts that "Our country's economy is still in tough times, faced with growing short-term pressures and unable to return to growth trajectory in 1-2 years."