Prime Minister Nguyen Tan Dung has committed to further improving institutions to help Vietnam’s economy grow based on the rules of a market economy and the country’s commitments to international integration.

Speaking on day one of the tenth meeting of the 13th National Assembly (NA) in Hanoi on October 20, Dung unveiled plans to develop and operate markets effectively towards 2020, ensure healthy competition for enterprises in different sectors, and carry out development strategies, resource allocations and price management in line with a proper market mechanism.

One of the major problems, according to Dung, is inadequate awareness of the socialist-oriented market economy in many fields. This has resulted in drafting and applying institutions and policies that are inconsistent with and unsuitable for a market economy. This is one of the reasons resources have not been effectively mobilized and allocated for development investments.

In addition to institutional improvement, the Government leader said the targets for next year and the next five years are to stabilize the macro economy and achieve higher economic growth.

Vietnam will concentrate on implementing strategic breakthrough programs, boosting economic restructuring, and stepping up productivity.

The Government is committed to continuing monetary and fiscal policies that help rein in inflation, keep the Vietnam dong stable, and increase foreign reserves; improving management of budget collections and spending; making reasonable budget allocations for routine spending, development investments and debt payments; reducing overspending; controlling public debt; and ensuring national financial security.

Key economic targets

Dung said gross domestic product (GDP) growth is estimated at 6.7% next year and 6.5-7% per year in the next five years.

GDP per capita will be around US$2,450 next year and around US$3,750 by 2020. Industries and services will make up more than 85% of GDP.

Besides, total investments of the period will be equivalent to 31% of GDP, and budget overspending will be brought down to 4.8% of GDP in 2020 and 4.95% in 2016.

Total factor productivity (TFP) will contribute 30-35% to economic growth while labor productivity is expected to pick up 4-5% annually. Energy consumption over average GDP is set to decline by 1-1.5% each year towards 2020 and 1.5% next year. The urbanization rate will reach 38-40% in 2020.

Next year’s consumer price index (CPI) is projected to grow lower than 5%.

As for the economic performance of this year, Dung said the economy is expected to expand over 6.5%, the highest in five years and higher than the targeted 6.2%.

CPI growth has fallen significantly, from 18.13% in 2011 to a 15-year low of 2% this year. Interest rates have dropped and are equivalent to only 40% of 2011.

Revenue from crude oil has gone down considerably but State budget collections from domestic sources have increased, and therefore this year’s budget collections will still inch up 7.4% and five-year collections will double the previous period. Budget spending would be 2.17 times higher and average overspending would be around 5% of GDP per year.

Public debt towards the year-end is projected to reach 61.3% of GDP while the respective proportions of Government and foreign debts would be 48.9% and 41.5%, with all at safe levels.

Dung acknowledged that overspending has remained high, public debt has swelled and the debt payment pressure has mounted.

The settlement of bad debt and restructuring of ailing joint banks are still facing many difficulties. In addition, it has turned harder to raise capital from foreign sources.

However, Dung said the Government has virtually achieved overall targets, especially controlling inflation, stabilizing the marco economy, ensuring social security, improving the lives of people and maintaining growth at a reasonable rate.

Lingering woes

A report presented by head of the NA Economic Committee Nguyen Van Giau showed the NA pointed out many concerns for the economy. 

According to Giau, the annual growth rate of 2011-2015 averages out at a mere 5.88%, lower than the previous period and the target set by the legislature.

Labor productivity of Vietnam is far lower than Singapore, Malaysia and Thailand.

Growth of the services sector has slowed in the past two years, with a 5.96% rise in 2014 and a 6.4% rise this year compared to 6.56% of 2013. Poverty reduction is not sustainable.

Supply and demand on the labor market are not balanced, which leads to a high unemployment rate of university graduates. Around 60% of fresh graduates could land jobs after three months in the period between 2010 and 2014.

The NA is also concerned over the low competitiveness of the economy and the higher oil exploitation than the limit at a time of falling low oil prices.

The agricultural sector grew by 2.08% in the year’s first three quarters while that of last year’s same period was 2.94%. Despite much contribution to the country’s export turnover and a trade surplus of some US$10 billion each year, the sector saw a decline in both export volume and value. No effective solutions to consumption have been mapped out, affecting incomes of farmers.

Vietnam will run a trade deficit this year after three years of trade surplus. The NA said the domestic economic sector was always in deficit, with US$56.3 billion in the 2011-2014 period and US$15.8 billion between January and September of this year, while the foreign-invested sector saw a growing surplus.

According to the NA, if policies are not effective to spur the development of the private sector, its production would contract, making it difficult to cope with the current trade deficit.

Besides, tightened monetary and fiscal policies have dealt a blow to enterprises.

Data of management agencies showed around 60,000, 67,800 and 54,566 enterprises suspended operations in 2013, 2014 and in January-September of this year respectively. The figure in the nine-month period was equivalent to that in all of 2011.

SGT