04:06 (GMT +7) - Saturday 22/07/2017

Op-Eds

What it takes

Released at: 12:00, 16/02/2017

What it takes

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.

by Hai Van & Duy Anh

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 flo