The fatal illness

“Last week, I met 40 enterprises in the construction industry. They said there was nothing to do in the city. Everything was standing still. HCM City needs to look at the situation realistically,” said economist Tran Du Lich at a meeting about socio-economic development in the first quarter of 2023 in HCM City late last week.

The country's economic locomotive of HCM City had a growth rate of only 0.7 percent in the first quarter, ranking 56th out of 63 provinces and major cities and was at the lowest position among the five centrally-run cities. Most indicators showed sharp declines.

Lich stressed that public investment disbursement was just 2 percent which was "really sad", and purchasing power in HCM City was even lower than the average level of the entire country, which has "never happened before". And the commitment to "remove institutional bottlenecks’" has not occurred.

These are the matters that most worry HCM City’s leaders. Party Committee Secretary Nguyen Van Nen was quoted by the press as saying that the economic difficulties of HCM City seem to be a "fatal illness".  He questioned if the city, and departments and branches have enough determination to follow therapy to treat the disease.

Meanwhile, HCM City Mayor Phan Van Mai pointed out both outstanding and emerging problems and questioned if there is any agency that doesn’t know where it should start from to settle the problems.   

He said that he had heard recently that departments were collecting opinions and were reporting that they were "still awaiting opinions". He said this should stop immediately.

The opinions shown at the meeting reflect the current difficult situation in HCM City.

In fact, the problems are occurring in many other localities.

What is happening in Bac Ninh?

Bac Ninh province witnessed the sharpest gross regional domestic product (GRDP) decline in the first quarter of the year – 11.85 percent.

This was attributed to the decline of the industrial sector, especially electronics, computer and optical manufacturing.

Decreases were reported for 18 out of 23 key products of the province in comparison with the same period last year. Printers and inkjet photocopiers saw the sharpest decreases (- 46.6 percent), followed by phone batteries (- 30.47 percent), and smart watches (- 29.95 percent). Electronics, computers and optical products saw a 35.93 percent decrease.

The foreign-invested sector has been acting as the major economic driving force for many years, while domestic enterprises are small and fragmented. 

Many enterprises don’t have orders and have had to scale down the production. Dissolution, layoffs and working-hour cuts have occurred at many enterprises.

Public investment in Bac Ninh, like other localities, is problematic. By the end of the first quarter, investment with the state’s money was only VND1 trillion, down 10 percent compared with the same period last year, while disbursement was just a bit higher than 12 percent of the yearly plan.

"No way out has been found for public investment," reported the provincial statistics agency.

In the first quarter of 2023, Bac Ninh granted business registration certificates to 668 enterprises, lower than the number of enterprises which had to suspend operation (731, up 46 percent), and lower than the number of enterprises which completed procedures for dissolution (up 12 percent).

The growth drivers

The GDP growth rate of the country in the first quarter was 3.32 percent, the lowest growth rate in the first quarter since 2011, which was only higher than Q1 2020, the first quarter impacted by Covid-19.

The driving force for economic growth came from the service sector (up 6.79 percent). Of this, wholesale and retail grew by 8.09 percent, eatery and accommodation services grew by 26 percent. The two factors determined the growth rate of the service sector in general, because wholesale and retail make up 80 percent of service revenue.

The growth of the service sector is a matter of concern. While the GDP growth rate was the lowest, which meant the consumption decreased, the inflation rate increased more sharply than the other first quarters, the service sector surprisingly obtained the highest growth rate. This is really a paradox, noting that many shopping malls and markets are deserted, and a high number of workers have become redundant.

As for businesses, the number of enterprises leaving the market reached a record high, about 100,000. The private investment had low quality, while FDI for the first time decreased in both the implemented and newly registered capital. The noteworthy thing is that the newly registered capital decreased by 40 percent, the sharpest decrease since 2011.

The other driving forces, including industrial production and export continue to decrease and they are believed not to recover strongly and rapidly in the time to come.

Tu Giang