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Quality, efficiency key to economic future

Update: September, 20/2012 - 11:05

 

by Dr Nguyen Dinh Cung
(VNS) The launching of a third round of bond buying known as quantitative easing (QE3) by the US Federal Reserve to save the US's economy raises the question whether Viet Nam should have a similar stimulus.

Dr Nguyen Dinh Cung, deputy director of the Central Institute for Economic Management spoke to the Vietnam News Agency on the issue.

Some economic experts expect the QE3 will have positive effects on Viet Nam's exports into the US. What do you think?

Theoretically, their opinion is not wrong. However, the situation should be put into reality. Viet Nam's exports to the US remained stable, even when the US economy was on the downturn.

This was because exports to the US were mainly essential goods, such as garments, footwear, seafood, timber and farm products.

According to the statistics of the General Department of Viet Nam Customs, the US is still Viet Nam's biggest trading partner. Total export-import turnover in the first seven months of this year reached US$13.9 billion, a rise of 20 per cent compared to the same period last year. So, I don't think the Fed-led rally will have negative impacts on our exports.

Oil and gold prices around the world rapidly increased after QE3 was approved by the US Government. How will this influence Viet Nam's economy?

Viet Nam not only exports but also imports oil. Certainly, it would influence oil prices in the domestic market.

In my opinion, the QE3 package is not enough to get the US economy back on track. So, the increases in oil and petrol prices will be as high as many fear.

Viet Nam residents are too concerned with fluctuations of oil prices on the world market, but they should not worry too much because, in my opinion, their impact is not huge. But the price rises are a real concern for fuel-consuming industries.

Under the current management of petrol prices in Viet Nam, enterprises that consume petrol have no choice but to passively accept them. The only way for them to modify the situation is to cut the consumption of petrol and reduce production.

In countries where petrol prices are market-oriented, enterprises that consume a lot of petrol always have a risk-prevention plan to deal with price fluctuations. However, this cannot be applied in Viet Nam because currently, no petrol consumers are allowed to buy oil directly.

The jobless rate in the US is high and the US government adopted an aggressive stimulus package to drive job creation. Should Viet Nam introduce a similar policy to accelerate the domestic economy?

Under the QE3, the Fed will spend $23 billion to buy mortgage bonds for the remainder of September. It will then purchase securities at a clip of $40 billion each month until the job market improves.

This proves that the US focuses on recovering the real-estate market to create stimulus for production and then labour demand. Many have worried that the money flow will get out of control. However, I think that the policy will help improve living for most residents.

The US also has a strong industrial base. So, with this stimulus policy, its economy will recover at higher speed than other countries. Meanwhile, in Viet Nam, the price of housing remain very high, but properties are owned by just a small group of people.

So, most people would fail to benefit if the Government adopted a similar policy to save the real-estate market. In my opinion, that might widen the gap between rich and poor and create injustices in society.

Viet Nam should focus on re-arranging economic resources to enhance quality, efficiency and competitiveness without increasing costs. Restructuring must also go along with improving social security. — VNS

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