Sunday, June 7 2020


Overspending threatens economy

Update: February, 20/2016 - 10:00

Viet Nam has a plan for its economic development over the next 20 years. Bui Trinh, an economic expert, spoke to the Hai quan (Customs) on-line outlet regarding tasks that Viet Nam must accomplish.

In your opinion, what should be the focus of our economic management plan in 2016?

I would say that Viet Nam, for many years, has pursued a demand management policy with the country's GDP as the final target. However, in my opinion, I don't think GDP has a great significance on the national economic growth rate. For example, in 2014, Viet Nam's export turnover scored a surpl of about VND44,697 billion, and its GDP growth was almost 6 per cent. In 2015, the situation was opposite with an import surplus of about VND71,515 billion while GDP growth was about 6.7 per cent.

That's why I maintain my point of view that the narrow differences in the GDP from year to year do not affect the citizens' livelihoods much. However, for 2016 and the years to come, it is important for the Government to tighten its budget spending and to use funds wisely.

Some say that China's weak economy will negatively affect our economy, particularly our exports and currency exchange rate. How do you respond to this?

First of all, we should understand the root of the problem that has made the Chinese economy become weak. In China, consumption accounts for less than 50 per cent of GDP. So, to achieve a high GDP, for many years China had to focus on increasing investment. As a result, the investment ratio to the national GDP in China for many years has hovered at a little bit over 50 per cent. I don't think any other country but China can do this.

This year and for the next few years, China has a plan to lower its GDP growth. In my opinion, this is an indication that China has already changed its strategy regarding the significance of GDP growth.

Commenting on China's decision to lower its GDP growth in 2016 and the following years, quite a few international economic researchers have expressed their anxiety. But, for the case of Viet Nam, I don't think that we should be worried about our export turnover. It is simple because Viet Nam's agro-export turnover to China accounts for less than 2 per cent of our agro-export turnover. So, I would suggest that Viet Nam should not hastily adjust its exchange rate between VND and the yuan.

What's more important for us right now is to develop a plan to cope with a situation if foreign investment from China will divert to Viet Nam. There is no doubt that when the Trans-Pacific Partnership Treaty comes into force and the ASEAN Economic Community is operating, Chinese investment will pour into our country. It is a good opportunity for Viet Nam if we accept that our workers will only work on assembly lines only. However, if we think about the value that it will bring to our national economy, we have to consider carefully before making a final decision.

To escape sluggishness and backwardness, in your opinion, what must Vietnamese leaders do?

The first thing they have to do is quickly cut down on budget overspending as well as improve the effectiveness and transparency of public spending and investment.

Second, they must create a level playing field between FDI and Vietnamese enterprises.

Third, they must upgrade our market to prepare for deeper international integration and the enforcement of many trade agreements.

And finally, they must declare war on corruption at all levels.

Our current reform process has achieved certain successes and has been acknowledged by many foreign countries. To build on that success, what should be done next?

There are quite a few activities we have to do.

First, we must change our thinking. For example, when we talk about the growth rate, we have to define what fields or areas must increase their growth rate and others. At present, if we look at our GDP, it reflects the economic growth rate. In reality, many countries have scored very high GDP growth rates, but the national debts have been mounting, coupled with increasing trade deficits while living conditions have not improved.

Second, we should adopt an overview on the issue of reform, which must cover several factors, including income and its redistribution.

For example, when we look at income generation, we have to look carefully at the production model.

The Government should adopt policies to encourage the development of supporting products and create a level playing field between Vietnamese and foreign enterprises. — VNS

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