Economic Growth Rate May Reach 9 Per cent with Focus on Private Sector

In the context of a market economy and globalisation, not to mention the economy’s dependence on outside factors, including oil prices and the world market demand, it is necessary to set an orientation target. However, it is also necessary to dramatise the target. “Many people say that Vietnam should target an economic growth rate of eight per cent. I have a different opinion. With suitable conditions in the world and domestic economies and further reformed policies, it is possible that Vietnam’s economic growth rate may reach between 8.5 and nine per cent. Looking at the Chinese economy, people will understand why I believe so. China has promoted its reform, and despite efforts to slowdown its economic growth, China has reached 9.5 per cent in its economic growth rate. This proves that during the market economy, China has done better than us in mobilising resources from its people,” said Dr Doanh.

 

However, Vietnam’s economic growth rate in the coming years remains dependent on investment capital from outside, including ODA, FDI and overseas exchange. The sources are poured into low-value economic sectors, which depend on imports. As a result, the sources will not produce any positive effects on Vietnam’s economic growth. Dr Doanh said that Vietnam had to attract investment from foreign countries because Vietnam lacked capital. However, local resources have not yet been tapped fully. The local stock market is now equal to 1.6 per cent of Vietnam’s GDP. Vietnam should focus on the effectiveness of foreign investment attraction. To that end, the country should improve the role of scientific and technological application, increase its competitiveness and reduce production and business costs. Also, the country should concentrate on attracting foreign investment capital in hi-tech fields with suitable policies and mechanisms.

 

Foreign experts say that local resources should play a more important role for Vietnam’s high economic growth. Why shouldn’t Vietnam try to attract foreign investment at all costs and how can the country attract foreign investment capital to gain the highest effectiveness? According to Dr Doanh, Vietnam’s economy may gain a growth rate of at lease nine per cent if a focus is given to the private sector, which has capital volume double that of the foreign-invested sector and has generated more jobs for local people. If the sector is offered more favourable conditions, it will help the local economy develop more rapidly. A better investment environment, in turn, will help attract foreign investment. This is because before investing in any country, foreign investors learn about the local investment environment. Dr Doanh said: “Vietnam should encourage local resources to combine their resources with foreign investment to gain a higher effectiveness.”

 

In Vietnam, people’s standard of living has improved with per capita GDP increasing from US$580 in 2004 to US$640 in 2005. However, the gap between rich and poor has widened and investment in education, health care and welfare in poor regions remains low. This is because foreign investors do not invest in under-developed regions. In the coming time, the State should promote its investment in infrastructure development in the under-developed regions in Vietnam to attract local investors, who are willing to invest in their homeland. Many examples show that Vietnamese investors have developed projects in areas in difficulty. Also, for a more sustainable development, Vietnam should promote its investment in education and human resources development. Vietnam should not strive to gain a high growth rate at all costs by pouring more investment in the economy. Instead, the country should reform its investment policies with concrete orientations in infrastructure facilities. Also, it should issue more open policies to attract foreign investment, creating a more favourable environment for local and foreign enterprises.

A sustainable economy has to have a growth rate higher than its inflation rate. A two-digit inflation predicted by the World Bank for the Vietnamese economy should be taken into account. In fact, neighbouring countries have suffered the same high oil prices as Vietnam has in recent years but their inflation rates remain low. This proves that Vietnam’s high inflation rate results from other factors, including ineffective credit and investment policies. The Vietnamese Government and enterprises should be aware of the reasons and find suitable solutions.

 

At present, Vietnam lacks skilled workers. Therefore, Vietnam should develop services, which create intellectual value. These services help not only create added value for an individual economic field but also improve the economy’s competitiveness and encourage production, distribution and transportation development. According to experts, the resources of local people are huge but the State has not tapped them fully yet. With suitable policies on settling obstacles in land use and costs, Vietnam can take advantage of these resources. For example, overseas exchange sent home may reach US$5 billion. This amount would produce a high effectiveness if it was invested in the economy.