“How will Vietnam finance its ambitious development agenda over the next five years? At a time when concessional development assistance is phasing out - as a result of the recently obtained middle income status - Vietnam will need to increasingly rely on internal revenue generation. However, over the last five years, the revenue to GDP ratio has declined from 27 to 21 percent.”
This is the question that Mr Ousmane Dione, World Bank (WB) Country Director for Vietnam, raised at the Vietnam Development Forum 2016 (VDF 2016), held in Hanoi by the Ministry of Planning and Investment and the WB with the theme of “Facilitating an action-oriented government - New driving force for development”.
Building effective national administrative system
Speaking at the forum, Prime Minister Nguyen Xuan Phuc said that although Vietnam has achieved certain positive socioeconomic development results, it must address existing limitations and weaknesses to achieve rapid and sustainable growth objectives in order not to lag behind, with a GDP growth of 6.5-7 per cent a year in the 2016-2020 period.
The Prime Minister said that in the next couple of years, economic prospects implicit unexpected risks such as volatile oil prices, trade protectionist trend (due to possible TPP hindrances). These factors may cause heavy influences on production, FDI attraction, and exports. Moreover, natural disasters, climate change, saltwater intrusion, and droughts may cause negative impacts on the agricultural sector. Settlement of non-performing loans faced numerous difficulties. Public debts and debt payment pressure surged while the Government needs more resources to pursue the restructuring process and generate more driving forces for growth.
Meanwhile, international competition is getting fiercer due to limited economic capacity. The process of international economic integration, the formation and construction of the ASEAN Community, and the enforcement of free trade agreements (FTAs) and the Mekong Sub-regional cooperation will pose both opportunities and challenges that the Government must take more drastic actions to settle.
The Government is determined to build an effective, consistent national administrative system, a facilitating and action-oriented government, regarding this as his top priority in the 2016-2020 tenure.
In this spirit, the Prime Minister mentioned a number of orientations and measures for the coming time. Accordingly, Vietnam will perfect institutions and legal system, facilitate production and business, strengthen the State administrative apparatus, reform and streamline administrative procedures, prevent corruption and wastefulness.
Besides, the country will focus on improving the business and investment environment; raising competitiveness by amending, supplementing and accomplishing mechanisms and policies on planning and investment; encouraging innovations, business start-ups, and private economy; striving for better business environment in equivalent with the minimum average level of the ASEAN-4 group in 2017.
PM Phuc added that the government will restructure the economy in a practical manner in line with the transformation of growth model; raise productivity, quality, efficiency and competitiveness - the core contents of 2017; carry out medium-term public investment plans, give funds for infrastructure development, create ripple effects and connectivity for development; accelerate SOEs equitisation process and divestment of State capital from non-core businesses in 2016-2020.
Notably, public debt is a growing challenge to Vietnam’s macroeconomic policies. In addition to mobilising resources for development, the Government shall direct controlling public debts, debt payment in an effective manner. It will restrict government guarantee, inspect and supervise the use of loans for sub-loans to ensure the ability to repay, strictly control debts of local governments, amend the Law on State Budget Law, the Law on Public Debt Management, medium-term debt management strategy and programmes.
The Government will focus on improving the legal system on Vietnam Asset Management Company (VAMC); developing debt trading market; and handling bad debts. It will request credit institutions to tackle bad debts and ensure the publicity and approach to international standards.
Applying solutions concerning institutions, investment resources, environment protection
Minister of Planning and Investment Nguyen Chi Dung said, international contexts in 2017 are unpredictable while domestic prospects are challenging. To achieve rapid and sustainable development goals in the medium and long term, Vietnam must solve a series of issues related to market institutions, development motivations, and fiscal policies.
To tackle immediate issues while ensuring long-term development orientations, it is important to keep the flame of innovation, pursue economic restructuring policies and transformation of growth models, and enhance labour productivity, quality, efficiency and competitiveness of the economy.
Mr Ousmane Dione, World Bank Director for Vietnam, said, Vietnam has witnessed five straight years of macroeconomic stability, underpinned by stability oriented macroeconomic policies, including steps toward more flexible exchange rate management, introduced in early 2016. However, while these achievements are encouraging, challenges remain for the Government to achieve the objectives set out by the 5-year Socio-economic Development Plan 2016-2020. Such challenges include productivity challenge, environmental footprint of Vietnam’s growth, poverty and social welfare, and fund mobilisation for development.
He said, to stem these issues, there is a need for a broad framework to facilitate and promote domestic private sector development, level the playing field between all economic actors, and promote genuine competition as well as linkages among them to establish efficient internal and external production value-chains. The emergence and smooth functioning of land markets would be a great achievement at the end of the five-year development plan 2016-2020. This would have important economic and social benefits for citizens and private sector actors.
He added that reinvigorating domestic revenue mobilisation, complemented by efforts to enhance expenditure efficiency and debt management capacity, especially domestic debt market, will be important to ensure development objectives can be achieved without raising debt to unsustainable levels. In addition, ODA will need to be used more strategically, efficiently and effectively and aim to leverage private investment.
Anh Mai
Vietnamese
