Economic restructuring remains difficult
VietNamNet Bridge – The bi-annual Autumn Economic Forum 2014 held in the northern province of Ninh Binh last Saturday was seeking fresh ways to speed up Viet Nam's economic restructuring process.
Vietnamese engineers and foreign experts work at the operation centre of the Dung Quat Oil Refinery Plant.
The National Assembly's Economics Commission joined the Vietnam Chamber of Commerce and Industry and the Academy of Social Sciences in organising the two-day forum, which carried the theme: "Economic Restructuring: Expectation for Vigorous and Fundamental Changes."
In her address at the forum, Nguyen Thi Kim Ngan, National Assembly vice chairwoman, highlighted Viet Nam's economic achievements in the first nine months of this year.
Ngan said: "This forum is of great importance because it is held at a time when the Communist Party of Viet Nam is reviewing 30 years of renovation and five years of implementing the Resolution of the 11th Party Congress."
She stressed the difficulties now facing enterprises, the weak credit absorption capacity of the economy and a range of prominent social issues.
Ngan remarked: "We hope to receive contributions from economic experts, policy makers, state management agencies and local authorities to realise this year's targets and map out orientations for the years to come. We need to discuss the constraints in economic restructuring, especially in combining economic restructuring with growth model shifting."
She also suggested that participants focus on analysing the effectiveness of Vietnam's economic restructuring, including bottlenecks and other reasons for the slow process, and propose measures to remove obstacles to the successful implementation of goals for 2014 and the years to come.
Under its Socio-Economic Development Plan for 2011 to 2015, Viet Nam aimed to restructure State-owned enterprises, the public sector and commercial banks. Addressing the forum, UN Resident Co-ordinator Pratibha Mehta praised the progress in socio-economic developments and social security which Viet Nam achieved in recent years.
She said that amid uncertainties, as well as risks and opportunities, Viet Nam had great potential but also needed much greater effort, especially in strengthening business community capacity on the basis of advanced technological platforms, focusing on investments in human resources and pushing forward institutional reforms to face the challenges and seize the opportunities to facilitate its development.
"By August 2014, FDI enterprises accounted for 67.3 per cent while domestic enterprises accounted for only 32.7 per cent of export turnover. The value of FDI industrial production also reached approximately 70 per cent. This should be considered seriously because economic growth must be associated with the accumulation of domestic resources, strengthening of national capacity and increasing the strength of domestic enterprises," the former minister noted.
According to Tran Dinh Thien, director of the Viet Nam Institute of Economics, the country's economy has yet to reach rock-bottom in spite of its stable momentum and the decrease in its growth rate obstructions.
The economy is suffering from a heavy "congestion of growth," Thien noted, adding that only FDI enterprises, among the four growth dynamics that include State-owned enterprises, FDI enterprises, the private sector and the agricultural sector, delivered a good performance which, however, has brought about the trend of "FDI-tising" the economy.
Thien criticized the weak economic foundations, as well as the application of heavily administrative and short-term measures, the non-market-based pricing, and insignificant progress in reforming state-owned enterprises and the agricultural sector.
Showing sympathy with the views of Thien, Tran Du Lich of the National Assembly delegation of HCM City stressed the consequence of macroeconomic instability in the last six years, which was exposed most clearly in 2013 and showed that the economy was not yet out of the woods of depression.
Lich proposed a better legal framework for the settlement of non- performing loans. In his opinion, the Viet Nam Asset Management Company (VAMaC) should be made more financially capable, suggesting that an inflow outside of the banking sector deal with this issue.
Nguyen Xuan Thang, the forum chairman, argued that the economy should also be viewed positively in the light of such achievements as the improvement of the competitiveness index. But Thang noted that the agricultural sector was stable but exhibiting low growth levels as farmers kept returning their land.
To create stability, capital investment in agriculture should be increased. Thang and Vu Viet Ngoan, chairman of the National Financial Supervisory Committee, agreed that the tightening of credit due to the potential collapse of the commercial banking system in 2011 was the right policy but somewhat over the top, as it limited the access to credit sources of enterprises and exhausted them.
Thang proposed the clarification of specific solutions to restore opportunities to enterprises after the recession. He stressed that it was necessary to clarify whether inflation was slowing down because the right policies were being implemented or because domestic demand was weak.
It was also necessary to show how to restore aggregate demand, solve corporate debt, and identify a reasonable rate for the budget deficit to have more funds for restructuring the economy without recreating underlying inflation.
Participants agreed that no major changes had taken place in the process of restructuring the economy in 2013, and unless synchronized solutions were introduced and persistently applied in 2014, the results in 2015 would remain unremarkable.
Former Commerce Minister Truong Dinh Tuyen said the restructuring process was slow because of a lack of capital regulations, cumbersome formalities and an unfavorable business climate.