Economic Restructuring: No Pain, No Gain

Reciting the goal of economic restructuring: To establish a rational effective economic structure, Dr Luu Bich Ho, former Director of the Strategy Development Institute (SDI), candidly commented that Vietnam has just "nibbled at" restructuring. “Three years has gone but fundamental problems have not been solved thoroughly,” said the expert.  

According to a review report by CIEM, the economic restructuring programme has produced some positive results from 2011 to 2014. Vietnam’s economic restructuring process has attained remarkable achievements featured by maintained macroeconomic stability, raised national safety indicator, improved business environment, positive market reaction, steady economic growth trend, improved investment, labour and productivity performance. The contribution of economic restructuring to labour productivity growth is recognised. The business environment and the investment environment have been improved significantly with the enforcement of new laws on business and investment, improvements which are recognised by international ratings agencies. The report says Vietnam’s rankings will continue to climb strongly in the coming time. Public investments and operations of State-owned enterprises and the banking system have been made more transparent and placed under greater scrutiny. The shift in State budget revenue structure has also been gradually moved towards a positive. Increasing income budget sources in the face of reduced budget-funded investment into the economy provide more conditions for businesses to develop. The allocation of resources is still reliant on the banking system but the role of the stock market is rising, even in the most difficult time of the economy. The investment flow on the stock market is positive. Potential sectors with high added values are expanding in both trading scale and liquidity.

 

However, a lot of existing problems are found in the economic restructuring programme. Former CIEM Director Le Xuan Ba said that, to achieve the desired goals, we need to accept to pay the price. He added that we must pay the price for the restructuring process. The price we pay is that companies weak in capital, technology and governance must leave the market. The disappearance of many companies will result in a decline in budget revenue. Good restructuring will place a weight on short-term growth, but we must accept it for a better long-term growth. He said Vietnam needs at least three conditions to restructure the economy and change its growth model: (1) steadily maintaining macroeconomic stability with low inflation and strong macroeconomic foundations; (2) forming and developing modern market economy institutions, establishing the business environment of fair and transparent competition, low costs and low risks; and (3) developing high-quality human resources and synchronous infrastructure systems.

 

Dr Nguyen Dinh Cung, Director of CIEM, said restructuring is indeed the reallocation of resources, but it is not decided by the government but by the market. When the State retreats and the market advances, resources will be distributed more properly, and quality and efficiency will increase as a result.