Economic restructuring, pursued aggressively, can help Viet Nam surpass its current growth targets, economist Le Dang Doanh tells Countryside Today (Nong thon ngay nay)
The Government set a growth target of 5.8 per cent for the Gross Domestic Products (GDP) in 2014 and 6 per cent in 2015. What do you think about these targets?
Viet Nam's economy has great potential. I think that unless we apply aggressive reforms, the economy will remain at its current stage. If we apply reforms, we can even reach 7 per cent growth in GDP.
We need to handle some disadvantages and problems of the economy that have been exposed. Bad debt has been affecting the economy's recovery. Without reforms, banks will remain in their current status of operating with low efficiency. Credit cannot grow in such an environment. All is at stake and dependent upon our reforms.
Without real reforms, we won't be able to meet our targets, not just in GDP growth but also in the budget deficit, tax revenues, and labour efficiency. Debts of state-owned enterprises stand at alarming levels. This is very worrisome.
Meanwhile, the process of restructuring state-owned companies is moving very slowly, resulting in less effective investments, wasting our resources and denying other economic entities the opportunities they deserve.
So how should we reform our economy?
The most important task is to fully restructure our economy. That will eliminate weak banks that cannot survive in the market; it also helps control the efficiency of public investment; State agencies must also have their structures adjusted.
For instance, a local administrative unit reports that it employs up to hundreds of state employees. No state budget can endure the cost for that.
We have succeeded in nailing down inflation in 2013 (estimated at 6 per cent – the lowest in the last 10 years). This helped stabilise our macro economy. What benefits will economic reform receive from this?
The inflation rate reduced significantly in 2013. The interest rate also was reduced. Yet, the economy showed little sign of significant change. The economy is locked in a "depressed" state.
The economy offers capital, but players don't have the ability to absorb that capital, whether it is because they can't access loans or they don't want to get loans, since they can't expand their operations.
These facts show that the economy appears stable at the outset, yet it contains many problems to be resolved. There are many solutions, but the implementation is limited.
In particular, bad debt has remained almost the same, damaging the momentum and trust in our economy, which shows a weak recovery. This is a worrisome fact.
So how we can establish "trust and momentum for a recovering economy"?
First of all, to reform our economy we need to strive to create a pubic and transparent economy, and this must be done through institutional reforms. In order to develop transparency and healthy competition under the law, there must be institutional reforms, ensuring that state agencies won't use erratic administrative decisions to affect the market.
There also must be a mechanism to monitor group interests. At this moment, the institutional reform is drifting slowly, creating corruption and a lack of vigour in the economy.
The bottleneck of Viet Nam's economy in 2014 will lie in the comprehensive restructuring of the entire economy. There are many things needed to be done. The first and foremost are reforms in money and finance.
The Government and agencies have been applying solutions to help enterprises overcome these difficult times. Yet, whatever has been done fails to bring about real change. Many solutions are not timely or aggressive enough.
Therefore, in 2014 we need to promote our investment environment, help enterprises overcome challenges, including those in administrative procedures, such as investment permit applications and land clearance.
Particularly, we need to handle the problem of bad debts quickly and more efficiently, continue to restructure the banking system, and open the gate for credit sources for enterprises. We also need to expedite the restructuring of state-owned enterprises in 2014.
Again, "the bottleneck" of Viet Nam's economy in 2014 lies in the restructuring of our economy. Among many things, we need to handle the finance industry, first and foremost.
Therefore, the economic recovery in 2014 is heavily dependent upon the restructuring and handling of commercial banks' bad debts. This is extremely hard to apply to this solution, but I hope we can do it. — VNS