Economic expert Nguyen Minh Phong spoke to Ha Noi Moi (New Ha Noi) newspaper about what the capital should do to achieve its GDP target of 8.5-9 per cent in 2014
What's your assessment of Ha Noi's economic situation in the first half of 2014?
Generally speaking, Ha Noi's economy in the first six months was a miniature of the nation's economic picture. With external support and its own efforts, Ha Noi recorded many economic achievements, particularly in exports and tourism.
The completion of several infrastructure projects and tall buildings have further embellished the capital. Meanwhile the real-estate market has shown signs of warming up, particularly in the supply of affordable houses for people with low incomes.
What's about economic weaknesses?
What makes me worry most is the increasing number of enterprises declared bankrupt or that have temporarily stopped production. As a consequence, pressure is rising from the unemployed and industrial actions by workers are increasing.
In the first half of 2014, the city wasn't able to come up with policies to push its core products in both industry and agriculture. In addition, the city's strengths and comparative advantages in education, labour, infrastructure have not been properly tapped, neither has the concentration of enterprises.
Even the city's strengths in wholesale and retail faced strong pressure from foreign enterprises. That's not all, the pressure of low investment from Financial Direct Investment (FDI), the slow capital flow from banks and the limited capital resources of private enterprises and others were the dark spots in Ha Noi's economic picture. They were the bottlenecks preventing development.
Will you elaborate on these bottlenecks?
There are different factors causing them. Subjectively speaking, there are three main reasons causing the reduction in the FDI investment.
Firstly, Ha Noi's old industrial parks are basically full while new industrial parks are still in the pipeline. A supporting-industries zone and a high-tech park have just been inaugurated.
Secondly, in the past most of FDI capital was in real estate or projects requiring big land areas. But the sluggishness of real estate has dampened investment.
And thirdly, Ha Noi's comparative advantages in labour and infrastructure in attracting FDI investment, including supporting industries, have shifted to other provinces.
Last but not least, is the hurdle of bad debt. It has eroded business motivation and bank lending.
What should Ha Noi do to attract investors, particularly from overseas?
If we don't change our present thinking, it is likely that in a few years time there will be no improvement in FDI funding. It might even get worse due to the stagnation of real estate - and the supporting industries are not attractive to investors.
Another point I want to make is that although the city has a plan to speed up the development of supporting industries, so far it does not have any scheme on human resources development for the sector.
In short, for the long run, the city should focus more on completing existing policies rather than introducing new policies; training human resources, particularly in the areas of state management of enterprises; and practice transparency and accountability to enable enterprises to develop, particularly those involved in high tech and supporting industries.
How can Ha Noi maximise its strengths?
There are three things that Ha Noi should do. Firstly, it should focus more on in-depth development and enhance its comparative advantages. The first thing I suggest the city do is to increase loans for eco-agriculture and rural economic development. This is a long term development strategy having strong impacts on both politics and society as well as building new rural areas.
Secondly, the city should review its master plan and the development of supporting industries. It should also promote marketing activities as well as investment promotion in high quality services, such as health care, education, finance and banking, tourism and transport. These are the driving forces for the development of intellectual economics in the capital.
And finally, the capital must create breakthroughs in personnel work and ongoing administrative reform. — VNS