Ha Quang Tuyen, director of the System of National Accounts Department under the General Statistics Office (GSO), talks about how Vietnam could achieve growth of 6.2% as targeted.

Vietnam targets economic growth of 6.2% next year, but the world oil price plunge may make the target unobtainable. How will the oil price impact economic growth?

Ha Quang Tuyen: Production and business activities have been improving since last year. With such growth momentum, the economic growth rate of 6.2 % next year is achievable.

The oil price fall and the country’s possible oil pumping cut of 30% will make inroads into the nation’s economic growth. We anticipate that with an oil pumping reduction, gross domestic product (GDP) growth might be around two percentage points lower than the target. However, economic growth is also driven by many other factors. There is still much room for processing and manufacturing, trade, accommodation and catering industries, and finance and banking sector to expand further next year.

The growth of processing and manufacturing was 12.5% in 2010 before falling to 11% in 2011 and 5.8% in 2012 and rebounding to 7.44% last year and 8.45% this year. If growth of the sector returns to 9.5-10% and the banking sector grows 6.5-7%, they will offset the economic growth slowdown caused by a possible 30% oil exploitation cut.

It is important for the Government and administering agencies as well as businesses to make greater efforts to obtain the growth target.

The macro economy has stabilized but fundamental woes are still there. What do you think?

- Though inflation has fallen to a very low level, unpredictable factors still exist in the global economy and may affect commodity prices on the domestic market. Businesses with low competitiveness are under pressure of the nation’s further integration into regional and global economies.

Labor productivity has dogged Vietnam. Our labor productivity is now just one-eighteenth of Singapore’s, one-sixth of Malaysia’s and one-third of Thailand’s and China’s in terms of purchasing power parity (PPP).

However, Vietnam’s total-factor productivity (TFP) has gone up slowly and modestly compared to regional countries. TFP’s contribution to GDP growth in the 2001-2005 period was 11.9%, minus 4.5% in the 2006-2010 period and 23.6% in 2011-2013.

The nation’s economic restructuring is moving slowly, especially in State-owned enterprises (SOE) and the banking system. Bad debt has not been fully settled and aggregate demand has increased slightly. These are key challenges for economic growth next year.

The foreign direct investment (FDI) sector has contributed more to economic growth. How does the GSO access development of this sector?

- The FDI sector has developed quite rapidly in recent years and made significant contributions to the country’s economic growth. Some big names like Samsung and Nokia have continuously expanded production in Vietnam while producers of footwear and sportswear have downsized their operations in China and Bangladesh to invest in this market.

This year, exports of the FDI sector account for nearly 68% of the total export turnover and contribute 20.5% to GDP compared to 19.55% of last year, create more jobs and increase incomes of laborers. The index of labor use at industrial enterprises with foreign involvement is 9.5% while the overall figure at industrial firms is only 5.8%. Besides, the sector’s realized investment capital reaches VND265.4 trillion, up 10.5%.

Nevertheless, most FDI enterprises are of small and medium size and mainly outsource and assemble products. Their exports make up a big proportion but added value is low as most products are outsourced. Therefore, the contribution of this sector to GDP has risen slowly over the years with an increase of a mere 0.6% in the 2010-2014 period.

Developing the FDI sector is a right policy. However, now is the right time to select foreign investments and areas for foreign investors to avoid overexploiting resources and help prop up domestic enterprises.

A number of free trade agreements (FTA) will be signed next year. What are negatives for the economy and budget collections?

- Vietnam has further opened its doors, meaning Vietnam’s economy is more reliant on the world’s economy. With tax reductions as Vietnam’s commitments to old and new FTAs, its economic openness will be deepened.

In this context, Vietnam enjoyed a trade surplus but this is not sustainable as the country relies much on the FDI sector while exported products are mostly of low added value and improvements in the local production of supporting products to reduce imports are slow.

Good news is that import tariff cuts in new markets will facilitate trade and increase Vietnam’s exports. In addition, Vietnamese consumers will have more opportunities to use products of high quality and at reasonable prices, and FDI flows will rise. Some studies found that the country’s GDP could edge up an extra 2-2.5 percentage points thanks to FTAs and that wages would rise around 5%.

Nonetheless, we will also have to cope with many challenges. Businesses will have to compete fiercely with imported goods on the home market and the nation will face trade deficit. Therefore, businesses need to keep improving productivity and lowering production costs to boost their competitiveness.

Import tax collections will drop but the impact needs to be further calculated.