Business leaders offer Dung some sterling advice

Business heads say the economy should be carefully managed despite recent progress

No reduction in base interest rates, promoting state-owned enterprises reform and supporting small-and medium-sized enterprises were among the key recommendations international experts and economists presented to Dung recently in Hanoi.

In the first meeting of its kind, Dung and government standing members joined a round-table discussion with international scholars and businessmen, different views of foreign guests were presented with many of them were described very “open minded”, “frank”, and both “optimistic and pessimistic”.

Unlike other meetings with business community to explain the central government’s policies, Dung spent almost all of September 20 to hear different points of view on what was going on in the world today, what would happen in the future and suggestions to help Vietnam’s economy to get over current difficulties.

Almost foreign guests agreed that Vietnam’s central bank should not reduce interest rates as inflation was still high.
“From speakers’ points of view, the government should keep the current rates for other few months. In the situation of high inflation, keeping high interest rate is a correct monetary policy,” chief executive of Standard Chartered Bank in Vietnam, Laos and Cambodia Ashok Sud told Vietnam Investment Review outside the framework of the meeting.
“I feel that it is too early to reduce interest rates as inflation remains high,” said Alain Cany chairman of the European Chamber of Commerce in Vietnam.

According to the General Statistics Office’s preliminary figures, the consumer price index in Vietnam during the first nine months of 2008 increased by 22.76 per cent against the same period last year. The Asian Development Bank recently predicted that Vietnam’s year-average inflation for 2008 will possibly peak at 25 per cent and then reduce to 17.5 per cent in 2009.

“I have congratulated the government for recent improvements in a number of economic statistics and I do believe it reflects great efforts made by the government. Yet, it is too early for the government to relax,” said Ayumi Konishi, the Asian Development Bank in Vietnam country director.

International participants almost agreed that the government should accelerate state-owned enterprises’ reform process, particularly their equitisation for a better allocation of public funding and credit. Cany stressed that the government needed to put more pressure on poor performing SOEs and put a clear path for the equitisation process.
He noted that the central government should not cited the current world economic crisis as reason for the sluggishness in SOEs equitisation.

“My view is not this. It was not the case for some big SOEs who failed to find strategic shareholders in recent times, but for almost other SOEs when their prices were overvalued,” Cany explained. He stressed that the Vietnamese government should understand that strategic foreign investors would invest for a long term to transfer know-how, so they did not want to pay a “crazy price”.

“They want to pay fair price, which must be based on the profitability and the potential of the businesses, not on the stock market price,” Cany said. International experts also suggested the government to provide better support to well performing small- and medium-sized (SMEs) or private companies.

“Regarding SMEs, our recommendation was the SMEs sector is very important. So, for the long term, it is important for the SMEs in Vietnam to perform well to become the strongest force in the national economy,” Sud said. He stressed that in order to help accelerate the performance of SMEs sector, the central government should make a clear definition SMEs and then help encourage them to resist in themselves.

“Commercial banks in the country should also provide certain amounts of direct lending to SMEs to support their business operations,” Sud added.