Unsteady growth

A Central Institute for Economic Management (CIEM) report showed that annual economic growth averaged 6.5 percent between 2007–2011, much lower than the 7.8 percent figure recorded between 2002–2006 and also far below the 7.5–8 percent target.

Except for the agro-forestry and fishery sector, the construction-industry and service sectors failed to meet expectations. The industry-construction sector alone - the economic powerhouse that contributes up to 40 percent of the country’s total GDP – suffered a sharp fall in its growth compared to the pre-WTO period.  

Under its economic restructuring plan, Vietnam hoped to raise the agro-forestry-fishery sector’s revenue to 15–16 percent of total GDP by 2010, industry-construction revenue to 43–44 percent, and services revenue to 40–41 percent. Contrary to expectations, the country has not fulfilled these major targets.

The disappointing results from these three major economic sectors slowed down the national economy in terms of both growth and quality.  Many experts argued Vietnam was not well prepared for the challenges inherent in opening its economy to the world and thus suffered a number of shocks.

Former CIEM official Dr Pham Lan Huong blamed economic inefficiency for the slow economic restructuring, listing obstacles including low productivity and values, and small scale and scattered production.

In times of economic stagnation, Vietnam can usually rely on its traditional agricultural production. However, highly subsidised cotton planting and fruit and vegetable processing are revealing weaknesses. The country’s garment and footwear industries have yet to justify their leading industrial positions.

Economic expert Pham Chi Lan wondered whether Vietnam has properly capitalised on the opportunities arising from WTO membership. She said many policies are inconsistent and have yet to be evaluated in terms of their real impact on people’s lives.

More policies needed

The national economy is showing signs of recovery, backed by decreasing inflation, an improved trade balance, and increased currency reserves.

But CIEM Deputy Director Vo Tri Thanh warned the national economy has yet to address its perennial vulnerabilities, such as the inaccessibility of bank loans for businesses, low purchasing power, low investment, bad debts, and excess industrial inventories.

A number of policies have been introduced to ease the difficulties confronting businesses and stimulate the economy. Some of these policies have not delivered results.

Thanh said the crux of the matter is maintaining macroeconomic stabilisation, streamlining administrative apparatus, and reducing business bank loan interest rates. He underlined the need to settle bad debts, minimise tax, and stimulate investment and sales.

Considering the context of deeper international integration and in the interests of enhancing the national economy’s competitiveness, protection measures should be regularly substituted with development policies linked to value production chains.

The CIEM representative proposed that Vietnam accelerate administrative reform to foster a favourable business environment, encourage businesses to take advantage of the opportunities created by free trade agreements when expanding into overseas markets, and introduce policies that honour its international economic integration commitments.    

Former Trade Minister Truong Dinh Tuyen believed Vietnam needs preventative measures to avoid the shocks threatening its agricultural sector when farm produce import tariffs are inevitably cut. Farmers need to cooperate with businesses to work according to closed production-processing and sales cycles.   

VOV