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ADB urges State enterprises reform

Update: April, 10/2013 - 08:50
Workers from the State-owned 45-1 Lilama Mechanical Factory in the southern province of Dong Nai make pipes used in thermal-power plants set for export to Japan. — VNA/VNS Photo Van Khanh

HA NOI (VNS) — The Asian Development Bank predicted GDP growth of 5.2 per cent for Viet Nam in 2013, urging the country to ensure that its reform of State-owned enterprises could match up to similar reforms in other regional economies.

Although the Government has eased monetary policies, the uncertain health of the banking system has constrained credit growth in Viet Nam, said ADB country director Tomoyuki Kimura at the Asian Development Outlook 2013 in the capital city.

As a result, the country experienced GDP growth of 5 per cent last year – the lowest in 13 years, he noted.

As economic growth depended significantly on State-owned enterprises (SOEs) and the banking system, restructuring of these institutions should be done more strategically and selectively, according to the director.

"All the restructuring work cannot be done at one time, but some initial success and progress would spur further reform momentum," he said.

ADB has approved US$630 million in financial support for SOEs in Viet Nam since 2009, as the bank considers SOE reform critical to reducing the dominance of inefficient state production, promoting private sector development and enhancing economic growth in the country.

To cope with the challenges facing it, said ADB's Country Economist Dominic Mellor, the country should establish a good classification system for risk and loans, establish an asset management company and allow foreign investment in commercial banks to surpass 30 per cent.

Although the country remains attractive to foreign investors, most foreign investment went towards export and the purchase of raw materials from other countries, which does not significantly benefit domestic firms.

Furthermore, the ASEAN integration in 2015 will be a challenge for Viet Nam, as it adds more regional competitors to the market such as Indonesia and Myanmar.

A better economic environment and effective SOE reforms would help increase local competitiveness and bring back high GDP growth, the director said.

He used the phrase "slow reform, slow growth" to emphasise that if reform was slow, growth would also lag behind.

ADB also forecast that inflation would reach 7.5 per cent in 2013. — VNS

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