Barriers to Economic Development

According to Mr Dang Huy Dong, Deputy Minister of Planning and Investment, not only Vietnam’s economy, but also big economies worldwide have to face major economic challenges such as food and fuel crisis, the global economic recession, and the devastation of natural disasters. These difficulties have created pressure on the sustainable development of all countries on a global scale. So, both developing countries and developed ones should jointly cope with the global challenges of the 21st century.

 

Vietnam has begun to apply the innovation policy since 1986, through economic transition from centralised economy with the state subsidies to the market economy. It took 30 years to implement this deep reform and until now, Vietnam has made remarkable achievements. Vietnam has also achieved impressive results in the implementation of the Millennium Development Goals, especially in the field of poverty alleviation. Besides, Vietnam, along with economic reforms, has made significant changes in the institutions and policy process, policy enforcement, as well as the legal framework establishment for sustainable development. However, Mr Dong also stressed that Vietnam's economy still faced many barriers such as low growth quality, limited productivity and national competitiveness, income inequality and environmental degradation. All these problems become challenges for Vietnam's development in the medium and long term.

 

The recent data published by the Ministry of Finance based on 3,576 reports from businesses across the country have shown that, after equitisation, there are 85 percent of businesses getting revenue, while profit and the state budget, accordingly, is higher than in previous years.

 

However, according to Mr Nguyen Dinh Cung, Director of CIEM, institutional reforms in general and equitisation of enterprises in particular still faces many challenges. The conduct of the enterprise equitisation has to cope with difficulties because a large portion of state-owned enterprises are monopolizing in the fields of electricity, gasoline. Inappropriate functions as roles of state-owned enterprises are distorting the market, leading to the low performance of enterprises. Moreover, the Vietnam management mechanism is not effective; laws related to equitisation do not cover all of the business objects that should be equitised. 

 

In addition, the main reason why state-owned enterprises had such difficulties is due to the inadequate asset valuation process, which is also related to the stock market. Some businesses have stock price much lowering than its value so many investors are unwilling to buy because they choose stocks with high liquidity. Besides, too high asset valuation also slows the process of equitisation. "Moreover, it is hard to make a decision of which business should be equitised first? The ones with high profit and effective operation or those take losses? Other factors to be considered such as which strategic partners should be chosen, shares of which state-owned companies should be sold and for whom,” said Mr Cung.