The National Assembly has set a goal of obtaining a 6-6.5 percent GDP growth rate this year, but the Ministry of Planning and Investment (MPI) has proposed that the government strive for 6.5-7 percent. 

The figure is much higher than that predicted by IMF (International Monetary Fund) (5.8 percent), the World Bank (5.5 percent) and ADB (Asian Development Bank) (6 percent).

Such a high target is very challenging, given that in recent years, many officials in localities dared not to do anything or make decisions for fear for breaking the laws.

MPI, in its reports, always emphasizes the need to overcome the fear oc being wrong at work, and stop the behavior oc laying blame on each other and avoiding responsibility.

This is because problems have put a brake on the country’s efforts to promote development in both the public and private sectors.

Public investment 

Public investment, one of the most important pillars for development, is an example. In the first half of 2024, disbursement of public investment was just 29.39 percent of the plan, while the disbursement rate in localities was 29 percent, lower than the 33 percent in 2023.

HCM City, the largest economic center of the country, has huge capital this year, VND79.2 trillion, higher by VND11.2 trillion than last year. However, in the first six months, the city disbursed only VND11 trillion, or 13.8 percent of the plan.

The city has witnessed a growth slowdown in recent years compared with the previous development periods.

As for Hanoi, the city has VND81 trillion for public investment. More than VND17 trillion of capital was disbursed in the first half, or 21.2 percent of the yearly plan.

Hanoi has the highest disbursement rate in the country. but it faces obstacles in executing the PPP (private public partnership) project on building the Belt Road No1 - Capital City area.

Hanoi’s policymakers believe that procedures for inviting bids for the project will only be completed by November. Therefore, disbursing VND4.19 trillion for the project is not feasible.

Private investment

Reports show that investment by the private sector increased by only 6.7 percent in the first half after it dropped to a low of 2.7 percent in 2023.

If inflation is excluded, private investment would be standing at minus growth rates for some quarters. This is alarming, given that the investment growth rates of the private sector were always 15-17 percent, and that private investment makes up 55-60 percent of total investment capital of the entire society, which is the major driving force for Vietnam’s growth.

Meanwhile, in the first half of 2024, the number of newly set up businesses and resuming businesses was 120,000, which was a little higher than the figure of 110,000 businesses leaving the market. As such, the ratio of businesses joining the market to businesses leaving was 1 to 1, the lowest level in many years.

In previous years, only one business departed for every four businesses joining the market.

The General Statistics Office (GSO), which conducted a survey of 30,000 businesses, found that 53.8 percent of polled businesses said they were facing difficulties as domestic demand is weak, while 46.9 percent did not have new contracts.

Recommendations 

Cao Viet Sinh, former Deputy Minister of Planning and Investment, said that the minimum wage increase, starting July 1, has put pressure on prices and inflation. Meanwhile, people’s purchasing power and private investment need to be raised in the second half of the year to support GDP growth.

Sinh, who has returned from a field research trip to the Red River Delta and northern mountainous areas, said localities complain about three major obstacles: required procedures in construction, and investment and licensing in the field of natural resources and the environment.

“It is necessary to further decentralize. The central government decentralizes to local government, while local government needs to decentralize to lower (district) levels,” he said.

MPI has advised the government to set up a steering committee to be in charge of checking legal documents to identify obstacles and barriers, and then developing a law that amends and fixes problems in many laws. 

The ministry aims to amend the Law on Public Investment and Law on PPP, promoting decentralization, simplifying procedures and removing obstacles.

 
Tu Giang