Tightening Public Investment

According to Dr Nguyen Tu Anh, Head of Macroeconomic Policy Department (CIEM), in a long time implementing the economic restructuring between 2011 and 2015, the Government has issued many policies to maximize the restructuring of the economy. The major efforts of the government have achieved results such as the macro economy and the currency being maintained; national safety indicators improved; business environment improved and economic growth and efficiency of investment recovered; labour productivity and total factor productivity significantly improved.

 

However, Dr Nguyen Tu Anh frankly pointed out that in the task of restructuring public investment, everything just stopped at tightening public investment discipline rather than focusing on solutions to improve the efficiency of investment, avoiding waste; equitisation speed is slow, the incentives for state-owned enterprises are factors distorting the market; bad debt management process lasts long and bad debt resolution mechanism lacks transparency. The factors that cause bad debt are still existent and restructuring sectors is not substantive and not complying with market principles in regional links.

 

Dr Nguyen Xuan Thanh, Fulbright Economics Teaching Programme also said, in the way of restructuring, that the Government maintains the budget deficit in the coming period as at present will make the ratio of public debt/GDP rise to unsustainable levels. Besides, in terms of monetary policy, that the strong credit growth in 2015 did not go into production is a concern. In the first 9 months of 2015, total loans to the economy increased by 12.1 percent, but the share of credit to industry increased by only 6.7 percent; construction 14.3 percent, while private consumption and real estate 18.7 percent. Additionally, Dr Nguyen Xuan Thanh analysed that in public investment, Vietnam only focuses on resolutions and directives of the Government to "squeeze" the problem rather than substantive change on quality, not improve profit ratio of public investment projects. The SOEs still dominate and control the economy while profitability ratios compared to other sectors remain very low. The banking sector has identified weak banks and completed restructuring, but in fact there are many banks that have been restructured but are still in the process of monitoring and have to be restructured.

 

Agreeing with view of Dr Nguyen Dinh Cung, CIEM President, the goal of restructuring the economy in the period 2016-2020 will focus on: create jobs and improve the quality of jobs for local people; encourage medium and large enterprises to create regional links and clusters; improve the efficiency of investment resource allocation, and institutional reform of economic management. In particular, Vietnam needs to create the most favourable conditions for private enterprises and foreign enterprises; innovative public investment management; reform Owners functions, management of the State and enterprise; public services and budgets.

 

About the free trade agreements (FTA) and TPP, Dr Nguyen Dinh Cung said that we should not wait for the "miracle" brought by these agreements because they are too general, there are no requirements or specific content related to institutional reforms in the country, except for the right to freedom of association of workers. Or in terms related to the SOEs, the agreements only emphasise equality between Vietnam's SOEs with those in other TPP member countries, and the inequality or privilege of SOEs with private enterprises are basically not in the agreements. In addition, the TPP or FTA is high level of free trade, to better protect the rights and interests of investors, promote fair competition, equal treatment. While the conditions in Vietnam's economy are still very weak, therefore, to renew the internal integration firstly Vietnam’s economy has to reform even more strongly in the direction of the modern market economy.

 

At another point, Dr Nguyen Tu Anh considers that, to implement economic restructuring period 2016 - 2020, Vietnam needs to continue to maintain a stable environment of macroeconomic across four pillars: stable monetary and stable fiscal policy, stable market and stable policy environment. Particularly in SOE restructuring, a change must be implemented in "nature", ie in corporate governance, having strategic investors outside the state sector; simultaneously changing the way of thinking and operating objectives of privatization. If only implementing equitisation with a very small percentage to the outside, while mainly the mutual acquisition between SOEs, the problem will not be solved thoroughly.

 

But according to Mr Ray Mallon, Senior Advisor to RCV Project, to the present time, Vietnam is not really fully aware of the institutional development of market economy, therefore Vietnam needs institutional reform to improve high competitiveness, efficiency of the economy and know how to share the results of reform equally to everyone. Vietnam also needs to maintain the support of senior authorities, implement restructuring with focus and mobilize maximum support in all fields to achieve the optimal results.