Economy forecast to face challenges

A corner of Vietsovpetro Port in southern Ba Ria-Vung Tau Province. According to experts, there are still opportunities out there, despite the economic downturn, for local businesses able to realise and grasp them. — VNA/VNS Photo Hoang Chuong

HCM CITY (VNS)— Challenges continue to face both the global and local economy, but opportunities do exist for businesses who know how to recognise and grasp them, economists declared at a seminar in HCM City on Friday.

"The Government has recently approved the general plan for restructuring the economy, which goes together with a change in the growth model over the next seven years. In the next three years the country will focus on restructuring public investment, the commercial banking system and State-owned corporations," Dr. Tran Du Lich, a member of the National Assembly's Economic Commission, told the seminar, organised by the Vietnam Economic Times.

"The implementation of Government policies during these years will help increase the total demand of society and many opportunities for individuals and enterprises will appear, if new business strategies have been prepared.

"There will be an adjustment process by which market share will be redistributed,allowing businesses to have more shares and increase investment at lower costs. As part of the market restructuring, which will probably happen before 2014, the labour market will grow, giving businesses a chance to develop and improve their human resources," he predicted.

"Inflation rate is expected to reach between six and seven per cent and the Viet Nam dong to US dollar exchange rate is likely to fluctuate by two to three per cent this year. Companies should pay attention to this when forming annual business plans and considering medium-term targets," Dr. Lich added.

Tran Thanh Hai, Deputy Head of the Import-Export Department under the Ministry of Industry and Trade commented that as the US, Japan and countries in Europe have launched programmes promoting demand, Viet Nam's exports can exploit increased trading opportunities.

Foreign direct investment increased significantly in recent years in fields such as electronics, mobile phones, transport and machinery, and this is set to continue, according to Hai. He stressed the need for policies to be introduced supporting the consumption of farm produce, as large volume of rice, seafood and coffee can bring in a large income. He also called for the Government to help overcome capital shortages facing businesses and to boost export credit insurance, ensuring the quality of exported items is high so that demand grows further.

Deepak Mishra, Chief Economist of World Bank in Viet Nam, sounded a note of caution to the conference, warning that a high level of basic inflation could severely hinder the nation's economy.

He warned that a premature loosening of fiscal policies might prompt resurgence in inflation.

The WB's chief economist also mentioned the worsening asset quality in credit institutions as another challenge. Public debt could rise sharply if liabilities in the banking sector and State-owned enterprises are realised, he said. He warned that despite the need for caution, a delayed and inadequate course of structural reform would result in slow economic growth, especially if the bad debt crisis is not solved and continues to hamper credit flow and limit the available capital for new businesses.

He said that a mechanism is needed to combat this issue, and suggested the establishment of a debt trading company that requires clear identification from all of its financial sources and follows the principles of transfer pricing.

He also urged the consolidation of the banking sector by investing further in risk management and allowing foreign banks to take control of domestic ones. — VNS