Never Miss a Chance

Dr Nguyen Duc Kien said macroeconomic policies need time to have their contents translated into practice and directly impact the economy. Without sudden big changes, this year’s growth rate will be similar to that of 2015, estimated at 6.7 per cent. Despite high economic growth, companies will still find it hard to do business because high inflation drives investment and business expansion.

 

Indeed, we have not had satisfactory answers to macroeconomic stability and high GDP growth. For example, why were economic growth high and inflation low but State budget collection was tough? Why did businesses find it hard to mobilise investment capital to expand production and people's lives improve only a little. Why were there such paradoxes?

 

We know that the nature of Vietnam’s economy has not been changed since 2011, that is, investment-driven growth.

 

In 2015, overspending was certainly higher than 5 per cent, plus 0.65 per cent of inflation while economic growth was 6.68 per cent. Among three growth pillars, agriculture tended to decline, trade and service growth was similar to GDP growth, and construction and industrial growth was 9.8 per cent. Further analysis showed that the high construction and industrial growth was driven by construction, including transport, housing and property construction, which accounted for two-thirds of the weight. Meanwhile, the industrial growth contributed to only a third.

 

These figures proved that Vietnam's economy still relied on investment to generate growth. It is as if, with nearly 6 dong, including overspending - money borrowed, plus inflation - the devaluation of dong, the economy gained only 6.68 dong. After taking away the lending amount, we had just 1 dong.

 

This was why people did not feel livelihood improvement. Wages were not raised but hospital charges and tuition fees climbed. In fact, economic growth did not come from effectiveness but from borrowing.

 

Currently, the economic growth is not generated by internal economic potential and labour productivity but only by investment. If investment is slashed, growth will fall. Vietnam has changed its growth pattern since 2011 but the outcome remained limited.

 

We do not lack resources but we fall short of motivations. Enterprises do not feel secure with their investments. Difficulties come from low global economic growth and political instability as well as the lack of investor confidence in investment.

 

Growth momentum comes from both sides - businesses and governmental authorities. We should not blame mechanisms and policies. Enterprises and entrepreneurs have not dropped the thinking of planned economy, not market economy. For example, almost 100 per cent of business start-ups relied on bank loans, while banks are only a channel of last resort to development investment in other countries.

 

 

Many companies familiarly depend on bank loans while business initiatives or ideas can also be sold for money in the market economy. When you have an idea or initiative, you must manage to persuade your friends and family to pool money to set up a company. Bank loans should be used as working capital while investment capital must be your own capital.

 

Without doubt, investment efficiency in Vietnam is high. Vietnam is one of the most profitable investment destinations in Asia as investors from South Korea, Taiwan, Japan and China have said. Regarding long-term investment, Singaporean investors see stable investment profit in Vietnam.

 

If domestic companies did not find many opportunities, then why did foreign investment soar in 2015? Many even anticipated a second wave of FDI flow after 2007. Foreign investors are not silly.

 

The matter is not if there is an opportunity or not, but that the opportunity is almost gone. If businesses do not do anything from now to 2018, they will miss the last chance for Vietnam to jump high.

 

The ASEAN Economic Community (AEC) is officially established but how many companies understand AEC? What will we get or lose when joining this community?

 

For the time being, companies must find out the answer to such questions as how much investment they need with this regime and how much investment they will add if there is a reform? What will they benefit from Trans-Pacific Partnership (TPP)?

 

We have a market economy and enterprises and business associations must capture opportunities. They must point out what the Government must change to support enterprises.

 

I know a company with annual revenue of VND600 billion, but it is ignorant of TPP. I asked the leader why he did not read this trade pact, he answered that he did not have enough time and asked me to give him a summary. Then, I gave him a summary of the trade agreement and he did not read it after a month I sent him.

 

The matter is how Vietnam carries out State investment and utilises SOEs. It is not a coincidence that the 30-chapter TPP has a chapter on SOEs. Every country has SOEs but the trade pact requires a market economy where SOEs are treated on an equitable ground with other businesses.

 

State resources are very important in investment. Taking the garment and textile industry as an example, the State may use proceeds from selling State stakes to invest in this industry instead of providing budgetary supports to realise plans. We need to build yarn plants to enjoy tax preferences when we export garment and textile products to the US market. Each yarn plant needs US$200-300 million of investment capital and not many private enterprises can borrow such a big amount to build a facility. The State must stand out to invest to build factories and then sell their stakes to other economic sectors to take back investment capital. The issue is how to supervise efficiency and quality of public investment projects?