Deeper Integration - Opportunity for Vietnam Economic Take-off

With a growth rate of 6.68 percent in 2015, Vietnam has achieved impressive growth. In 2016, if Vietnam continues to stabilize the macro-economy, the GDP growth rate could reach 6.8-7 percent. Not only that, if Vietnam can maintain macroeconomic stability, improve the confidence of consumers and solve problems for businesses, Vietnam may very well maintain high growth rates in the next five years.

 

Also, if in 2016 the oil price remains low, food prices, input materials like steel and other metals are also low, they will continue to have positive impact to lower input costs for enterprises, especially the manufacturing and processing.

 

However, Vietnam still faces fundamental challenges to be addressed in 2016. According to economic expert Nguyen Xuan Thanh, director of economic curriculum Fulbright Vietnam, the first problem is in the banking sector. Recently, efforts to restructure the banking system was only at ensuring liquidity in the short term. Bad debt was temporarily stored so the weak banks are still the biggest risk for the economy next year. Interest rates in general will be hard to fall, at least maintaining current levels.

 

With the issue of exchange rates, the recent moves indicate that although the State Bank was still cautious but went towards more flexible exchange rates management in 2016. The state will not manage exchange rate risks as before , and businesses and citizens will have to get used to the change in exchange rates. The success in business and investment are heavily dependent on management of exchange rates risks.

 

With real estate, in 2015 there were good signs for the recovery of the real estate market. That move banks pumped money into the sector. The weak real estate businesses were rejected from the market, the existing businesses are new businesses or old businesses that have been restructured to focus on market segments with real needs.

 

From late 2015 to 2016, the supply of apartments was big, so the possibility of increase prices is not high. This is a positive signal for the real estate market in 2016.

 

This year and in the coming time, according to economists, the intellectual force, labourers and farmers will benefit from innovation. But to benefit, farmers must be dynamic and take the opportunity to know and learn, to benefit from the supply chain, purchasing the product of strong businesses.

 

Besides, the force who is expected to have more development in this period is small traders and small businesses. When workers have income, spending the small traders, small businesses have a good opportunity to expand production and business, this creates increasing domestic demand. This is the most important issue.

 

Another group that gains benefit is the businesses producing for local consumption with quality service, management platform, reputed to domestic consumers. According to the evaluation, there will be foreign investment funds poured into the small and medium-sized enterprises.

 

In 2016, Vietnam began to step into a higher level of integration than currently.

 

Firstly, Vietnam joins the ASEAN Economic Community, which was established on December 31^st 2015. By participating in this community, Vietnam will face three challenges: the free circulation of goods, freedom of investment rotation and free flow of high-tech workers. Next, in 2016, Vietnam will implement of the Vietnam – Korea FTA which took effect from January 1^st 2016. Another FTA is between Vietnam and Eurasian Economic Union which is preparing to be ratified. Not to mention the other FTAs awaiting such as Vietnam - EU; and the TPP. According to the Minister of Planning and Investment Bui Quang Vinh, this is a turning point in the international economic integration of Vietnam.

 

Therefore, the Minister Bui Quang Vinh said, to take advantage of the benefits of the FTA, the most important thing is that Vietnam should have clear plans so each business and people can understand the opportunities these agreements brings and show them for how to take advantage of such opportunities; at the same time, to point out the challenges in each sector and field.

 

Because, according to Mr Vinh, FTAs are not the same. Each industry faces different challenges thus, each sector, the ministries have pointed out the challenges for each trade agreement and to appreciate their opponents.

 

Besides, Vietnam needs to link between associations and businesses, from there, build mechanisms and policies for promoting domestic resources which can take advantage of the opportunities that the FTA brings and plans to overcome these challenges.

 

This poses a problem that the government and ministries have the responsibility to do more, especially while Vietnam still has time, because the two largest agreements that Vietnam is preparing are Vietnam-EU FTA and TPP.