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Bumpy road ahead, but reforms should go on

Update: March, 08/2014 - 08:05

Vo Tri Thanh, deputy director of the Central Institute For Economic Management, spoke to the Sai Gon Economic Times on the impacts of the TPP and the FTA with the European Union.

Please explain why quite a few international institutions and experts have adopted a positive attitude towards our economy recently?

First, it is the world economy. The public debts in the US and the European Union have overcome the most critical stage and now are on the path to restoration at a rather stable pace.

Second, the political and geographical issues have seemingly been settled, factors that would put a cap on rising prices and inflation for 2014-2015, if there is no serious intervention from extreme weather phenomena. This positive trend is also reflected in the latest outlook of the IMF and the World Bank.

For example, the IMF projects that the global growth rate this year will be about 3.6 to 3.7 per cent this year against the 2.9 per cent last year.

Meanwhile, the figure forecast by the WB is 3.3 per cent, which is 0.1 per cent higher than that of the previous year.

But why don't many Vietnamese experts look at our 2014 and 2015 economic prospects like that of their foreign peers?

In my own opinion, there are two distinctive differences between our experts and their foreign peers.

First, we still see a lot of challenges that our economy is facing.

However, we also see light at the end of the tunnel. In other words, the situation is improving at the bottom, laying a foundation for the gradual restoration of our economic health.

Second, we should look straight at the challenges that we are facing while pinning strong hopes on a bright future. Bad debt remains a serious problem for us.

So are the weaknesses of the banking system, the structural reform of the State-owned enterprises, the public debt and State budget deficiency and others. Some people have said that our economy now is at its rock bottom. It means a very weak foundation for the economy. I think such an argument is based on two reasons.

In the past four to five years, our policies have changed quite often and the changes were not consistent.

In the past two to three years, the government adopted a firm political will to remove the bottlenecks in the economy, and yet the results were limited. These are the reasons which make many people suspicious about the bright economic picture in 2014 and 2015.

However, I think if we are able to identify the difficulties and challenges, we'll be able to work out plans to overcome them.

Whatever happens to our economy, we still have to focus our efforts on stabilising the macro economy; accelerate the economic reform and international integration.

What do you think our economic situation will be following the signing of the TPP and FTA in 2014 or early 2015?

Generally speaking, it will be positive. But technically speaking, there remain quite a few challenges. In my opinion, the best opportunity is the big market with diverse goods, in which we have good comparative advantages. In addition, these agreements are appropriate to our intention of conducting reforms in many domains, including institutions, state apparatus, legal documents and market orientation. These reforms, of course, must go along the line of efficiency, transparency, fairness and accountability.

Technically speaking, transparent transactions of the State-owned enterprises are compulsory in TPP. This requirement is at present very demanding for us. How do you respond to that?

This is our commitment and it is entirely in line with our policy of reforming SOEs. Yes, it is a technical matter, and yet it relates strongly with our institutions. Quite a few challenges lie ahead but we have to do them.

During the reform process, some sectors will be seriously affected and will have to narrow down their production. As a result, many social consequences will arise, particularly of employment. But we have to remember to cut costs during the adjustment process.

It is indisputable, the game is right, but it must be practical and workable.

We all agree that institutional reform is very difficult and can't be done overnight.

It must be flexible in negotiation. The flexibility must ensure the time factor for making adjustments, commitment and implementation.

For example, we need three years to conduct the SOEs' reform. But in the three years the political commitment must go hand in hand with responsibility. When the three-year deadline ends, we cannot say the reform is not yet completed and then ask for another three years. This is unacceptable! We have learnt a very expensive lesson from the preferential time that we were given.

If the TPP and FTA are concluded this year or the next year, do you think our market reaction will be like that in 2007 when Viet Nam joined the WTO?

In the long run, I think the TPP will have much more impact. WTO is a organisation for any country wanting to join the global economy.

But for TPP, if any country wants to join it, they must conduct reforms to bring their institutions in line with the present world environment of trade, investment and economy and also the future. These requirements are closely tied to our country development process, particularly when we have become a middle-income country.

However, I'm confident that a bright future awaits us. It is reflected through some of our macro indicators. What is most important for us now is to continue to maintain a stable economy and speed up the reform process. — VNS


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