Photo: Duc Anh
VET asked a number of key players in Vietnam’s economy about what is needed for the country to continue on its path towards development and prosperity.
2017 will also be a difficult, unstable, and hard-to-predict year. Vietnam’s roadmap for development is still driven by a spirit of constructive government and the entrepreneurial spirit of its citizens. The biggest resource for economic growth comes from its people. To fully utilize that resource, the government must earn their trust and be constructive. It will have to ensure it carries out two key tasks: restructuring the economy and conducting institutional reforms in the most aggressive manner possible towards becoming a market economy. We have high hopes for 2017, however, because last year’s forecast was lower and the economy exhibited good signs. This year we hope that the new government will become even more constructive and be a driver of economic growth.
I believe problems regarding monetary and fiscal policy, the banking sector, and ministries and sectors will be resolved gradually and we will continue to see stability and development. The advancement of the private sector, with a good policy framework behind it, will be an important factor in Vietnam achieving its growth targets. The equitization of State-owned enterprises (SOEs), if quickened this year, will also create the conditions to attract investment, both local and international, into the private sector. The financial source from the divestment of State capital in SOEs can also be used for important goals in infrastructure, education, and social security, etc. This will support economic development in 2017 and in the years to come.
Mr. Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI)
While the prospects for growth in 2017 are backed by motivating forces, there is still resistance factors causing instability in the macro-economic situation. Vietnam, whose middle class is forecast to increase to 33 million by 2020, is expected to see higher consumption spending. Thanks to efforts made in previous years, especially in 2016 under the new government led by Prime Minister Nguyen Xuan Phuc, the investment environment has been improved and will have a major impact during 2017. The private sector is also showing positive signs, with the number of registered enterprises surpassing 100,000 in 2016, making it capable of being the driving force of the economy in 2017. Regarding exports, even though the TPP may not proceed, Vietnam is still party to 16 other free trade agreements. The Regional Comprehensive Economic Partnership (RCEP), if passed, would be a major boost for Vietnam’s exports.
There are still, however, resistance factors that may cause instability in the macro-economic environment. Public debt is increasing and bad debts remain unresolved, while economic growth still relies on investment and exports and not on the production and manufacturing of high value-added products. In regard to external risks, the rise in value of the US dollar and the possibility of the US Fed increasing interest rates this year, along with a return of protectionism, are indeed serious threats for Vietnam. The inflation target of 4 per cent, I believe, is unrealistic because there were many factors pushing up inflation in 2016, such as the exchange rate, and the higher crude oil prices, when they occur, will see adjustments in service prices.
In my opinion, Vietnam will have to make careful decisions and must be prepared for complex external fluctuations. We cannot spread investment into each and every sector given that investment flows are strong, and there must be a focus on advantageous industries and sectors such as tourism and agriculture. In the future, Vietnam may become the next country to receive greater US attention, after Japan, because of all the TPP members, only Vietnam and Japan do not have a free trade agreement with the US.
Mr. Truong Dinh Tuyen, former Minister of Industry and Trade
The government had a message last year, that entrepreneurs will be a driving force for economic growth in the years to come. As an enterprise with both Vietnamese capital and an international element, I firmly believe that we need stronger and clearer confirmation from the new government on constructivism, and whether this is a target to reach for, a slogan to act on, or a model to deploy. For enterprises to develop, we need to have development with vision and the capacity for effective governance. The effectiveness of a constructive government lies in creating the best possible business environment for enterprises to develop. But we need to see real action. If not, the trust the new government has garnered will soon wane.
Prime Minister Nguyen Xuan Phuc recently said that Vietnam must change its thinking. Gone are the days when economic growth relied on resources extraction and cheap labor. Vietnam needs to focus on modern technology to survive. However, the problems are how many workers are highly capable and how many companies are able to invest in technology. In addressing these challenges, enterprises expect to be treated fairly. Almost all new enterprises are in the non-State sector, and they are in serious need of fair competition with foreign-invested enterprises and SOEs with advantages in business opportunities, land use, and public investment.
Ms. Ha Thu Thanh, Chairwoman and CEO of Deloitte Vietnam
In all our years in Vietnam we have continually increased our support for Vietnamese enterprises so that they can be capable of participating in Samsung’s supply chain. In 2015, Vietnamese enterprises only participated in simple tasks, such as packaging and supplying pallets, and rarely participated in high tech tasks. In 2016, they managed to participate in the supply chain in sectors that are high-tech and have higher technical requirements. I have seen that the Vietnamese Government and economic experts want the economy to develop quickly but the process of developing support industries takes a long time and cannot be achieved overnight.
Samsung is a global enterprise with annual revenue of $200 billion, but to achieve that took 48 years and the overcoming of various obstacles. We are ready to support Vietnam so that similar results take only 20 to 30 years. The most notable part in developing support industries is human resources. Samsung is currently hiring a lot of Vietnamese workers. But one thing I notice is that despite earning good grades at university or college, the workplace skills of many graduates are still fairly low. Vocational training in high-tech sectors needs good equipment, but these are lacking in Vietnam. I hope that the Vietnamese Government will invest strongly in training equipment to create high quality human resources, which are an important factor in growth.
Mr. Hyun Woo Bang, Deputy CEO of Samsung Vietnam
Every year is difficult, and this is perfectly normal. The more difficult it is, the more pressure is created, so we should not be too concerned about the difficulties challenges pose. The most difficult matter, in my opinion, is whether Vietnam wants to change proactively or wait until the very last minute when the pressure can no longer be borne. Sadly, there are always excuses every time growth does not meet the target and the community of Vietnamese experts rarely changes. Last year, when growth did not come close to the target, the explanation was the decline in the agriculture and mining sectors. But if mining recovers this year, Vietnam will still not see 6.7 per cent growth. No one has ever seriously questioned Vietnam’s growth model or recognized it has reached its limit and change is required.
Only the Prime Minister has been calling for a constructive government. As far as I know, there have been no industries or localities discussing the idea of a constructive government. Furthermore, the new government will need to not only be constructive but will also need to operate as an enterprise, where State services are products and citizens and businesses are customers. The State must provide the best services at the lowest price. Government management must meet the demands of growth. With those thoughts in mind, Vietnam can ease a lot of constraints and turn challenges into opportunities. The target is to change towards a better local market and only by doing that can the economy be modernized. Last but not least, the business sector and the community of experts will have to put more pressure on localities and ministries to take action, along with the Prime Minister and the government.
Mr. Nguyen Dinh Cung, President of the Central Institute for Economic Management
The Communist Party’s resolution is of the people, by the people, for the people. If this was followed, Vietnam would be very successful. Execution is key. For businesses, the initial trust in the new government is high, but the next chapter will be more important. Maybe the government should start asking what businesses need and want. There are two ways it can do this: conducting research during the policy-making process and making businesses develop, and starting from the bottom to the top by asking what businesses really need. In my opinion, the second approach is more suitable now. However, the Labor Code still does not protect businesses or workers. At May 10, we are still unable to fire lazy workers. Therefore, the first step is to change the regulatory system to make it more adaptable and realistic.
Research must be conducted and businesses allocated into different groups. Those that are developing well would receive a specific type of support, as would those prioritizing modern technology. Those that have been operating for 10 to 20 years and seen strong development should be under a different policy mechanism. Only by having regulatory changes that fit actual needs can businesses survive. For now, the distance between words and deeds is still to great. In a future without the TPP, textiles and garments will be affected the most, but businesses in general need to remember that “every cloud has a silver lining”. This means that where there are challenges there are opportunities, and when there are opportunities businesses will also have to determine the challenges that may threaten them and identify appropriate solutions.
Ms. Nguyen Thi Thanh Huyen, CEO of Garment 10