Viet Nam shows signs of recovery, despite difficulties

Update: December, 30/2014 - 10:50
Mr Nguyen Thanh Binh.

The Vietnamese National Assembly (NA) has approved many targets for the country's socio-economic development in 2015, including for the GDP and CPI growth. Deputy Director of the Hanoi Institute for Socio-economic Development Studies Nguyen Thanh Binh speaks to Outlook about the country's potential to reach these targets.

The National Assembly has approved the country's socio-economic development resolution for 2015, including many targets. Which target do you value highly?

The NA has approved the 2015 plan with 14 main targets for the country's socio-economic development. I see that all targets reflect the country's development.

I am really interested in the four targets of gross domestic product (GDP) growth rate, consumer price index (CPI), total investment in social development and the export turnover.

But I want to turn back to the results of 2014, from which we can thoroughly evaluate the NA targets set for next year.

We are approaching the end of the year, with an estimated GDP growth rate of 5.8 per cent, which is a very positive figure as it was predicted to be a very challenging year for Viet Nam. The country was faced with several challenges, including China's illegal placement of its Haiyang Shiyou-981 drilling rig in Viet Nam's exclusive economic zone and continental shelf, and the impact of the global economic depression that caused many difficulties for domestic businesses.

The CPI is estimated to be five per cent this year, but earlier the NA allowed it to be below eight per cent. That is really a significant gap.

How can we reach such targets while dealing with several difficulties?

We have simultaneously carried out several activities. Success depends on many factors.

We mobilised from various sources an estimated investment capital of 30.1 per cent of the GDP in 2014, of which US$12.5 billion came from foreign direct investment (FDI), marking an increase of 8.7 per cent compared with last year. Meanwhile, the investment capital raised from the State budget and government bonds increased of 18.3% compared to 2013, thanks partly to the government's successful sale of sovereign bonds worth US$1 billion.

This year also saw record exports worth $148 billion, an increase of 12.1 per cent compared with that of 2013. This is the third consecutive year we have had more exports than imports. The key export products are crude oil, garments, leather shoes, seafood, agricultural products, telephones and electronics.

We have a number of local products that are an important link in the global value chain, such as coffee and rice of which Viet Nam is one of the leading exporters in the world. In addition, we have been producing garment products and shoes for several famous firms in the world.

In this case, the government has shown its leadership in resolving difficulties and boosting economic development. The government has issued policies related to the currency market, and the banks' interest rate and operations. I think this is a positive factor helping domestic businesses overcome difficulties and restructure the banking and financing system.

However, we have failed to reach a number of targets.

We are slow in the equitisation of State-owned enterprises. We set targets to equitise 432 SOEs in the 2014-15 period, but up to now only 71 have been equitised.

Regarding private firms, most enterprises are small and do not focus on development of technology. The number of businesses being troubled to suspend or terminate operation is still high.

Some of the above-mentioned factors are causing Viet Nam's competitiveness index to fall to 68 of a total 144 countries on the list. Viet Nam's rank is higher than that of 2012-2013 (75/144), but is lower than in 2010-2011 (59/144) and 2011-2012 (65/144).

Meanwhile, the country ranked 98th in the economic institution index in 2013-14, nine spots lower than that in 2012-13.

Can you evaluate the targets NA has set for 2015?

The NA has set a GDP growth target of 6.2 per cent for 2015. This is achievable because the country's economy has shown signs of recovery.

Viet Nam will integrate well with the world economy next year, and fully participate in the ASEAN Economic Community, seen as a landmark that will help the country reach the GDP target. Meanwhile, we will continue negotiations to join the Trans-Pacific Partnership.

The country will continue its reform following NA's approval of the Law on Public Investment, in which the medium-term plan has replaced with the annual plan, helping economy to easily set up and carry out long-term projects. This is one of the factors that will help Viet Nam reach its GDP target next year.

However, in my opinion, the GDP target does not match the country's potential.

The NA has set the CPI for 2015 at about five per cent. I think this matches our current condition. To reach this ambitious figure, I think the government will have to manage the macro-economy, while maintaining the CPI rate at around five per cent to prevent the return of inflation.

The expected investment capital of 30 to 32 per cent of the GDP in next year is good news. The capital will be mobilised from investors. However, the most important thing is how investment can be attracted to areas in need of support, such as agriculture and rural areas, and high-quality services of the tourism, logistics and subsidiary industries.

The NA set an export turnover target of US$162.8 billion in 2015, 10 per cent higher than that of this year. I think we can reach this target, even at the higher level when we integrate with the global economy. In addition, we have a stable number of export orders for products such as coffee, rice, garments, leather shoes and seafood, while we are still expanding the market.

However, it's necessary to increase the export of finished products, and reduce the export of crude products as this will help us earn high profits.

2015 will be the year to close the five-year 2011-2015 socio-economic development plan. During this time, we had an average annual growth rate of 5.8 to 5.9 per cent, lower than our expectations. The year 2015 will be the year of management, creating foundations, institutions and restructure for the economy, and creating advantages for development in the coming years. — VNS