|Vietnam started implementing its economic restructuring plan with a specific direction, focusing on sorting out public investment, the financial-banking system, and state-owned enterprises. VIR’s Hai Van spoke to Prof. Dr. Nguyen Quang Thai, chairman of the Vietnam Economic Association about key tasks to be carried out. |
What influences the implementation of the 5-year plan for economic restructuring?
|Prof. Dr. Nguyen Quang Thai, chairman of the Vietnam Economic Association |
The plan is influenced by many factors, both from the outside and the inside. However, the latter is the more important part. The positive aspects related to political and macroeconomic stability have reassured foreign investors and helped them to better interact with domestic enterprises and develop together.
International and regional integration continues to be a major direction. However, since the Russia-Ukraine conflict occurred, the situation has become more complicated, with supply chains disrupted and the occurrence of an unprecedented increase in commodity prices.
Meanwhile, challenges related to climate change continue to negatively impact the implementation of Vietnam’s commitments to greenhouse gas reduction and efforts to protect the planet.
However, the biggest concern at present is that the modernisation of the institutional system has not kept pace with the requirements of the new era. For many businesses, government institutions remain bottlenecks that need to be improved, although the investment environment has generally improved. The weaknesses of the management apparatus, especially at intermediate and grassroots levels, are causing difficulties for businesses and people.
Meanwhile, the uneven development of industries, regions, and social classes has rendered economic links insufficient. Resources have not been fully evaluated and allocated, and skilled workers merely make up a quarter of the labour force, hindering the increase of productivity for the whole society and the ability to absorb new technologies.
The macroeconomic stability continues to face challenges, especially with the recent shake of the stock market, the scandals related to corporate bonds, and the ongoing state budget deficit. While all of this is happening, savings remain low, and the efficiency of public investment disbursement is not high.
Could some issues come from overlap with previously approved strategies and plans?
No, there are absolutely no duplicates as the restructuring plan is a succession, with updates and adjustments. However, the pandemic response and national governance should be considered important factors throughout the economic restructuring process in the next five years.
It’s also crucial that advanced methods related to national governance must be adapted to each stage, especially during recovery and development, in order to achieve strength and prosperity in the next 30 years.
Vietnam is now reopening its economy again, but it is still necessary to prepare new scenarios and flexible policies that take into account the impact of new COVID-19 variations that may affect the whole society and economy.
In the process of economic restructuring, what principles should be applied in resource allocation and usage?
Allocating and using resources efficiently is the function of a true market economy. Therefore, during the restructuring process, the allocation and usage of resources must be carried out institutionally and in a modern way.
Land resources are overlooked at the moment, as the equitisation process of state-owned enterprises (SOEs) removes the location factor, continuing to focus on counting the number of factories. The equitisation of the Vietnam Film Studio in Hanoi is an example.
Besides this, other resources could also be missed if the restructuring process still calculates the asset prices of SOEs based on the books and does not take into account cars, cryptocurrencies, and bonds, among others. In addition, human resources are also neglected.
Market principles must also be maintained throughout the resource allocation, with regular monitoring and ad hoc audits. Rigidity in the implementation of stagnating plans, as well as administrative orders, needs to be applied thoroughly to reach good results in the allocation and use of resources. For example, when it comes to the land of SOEs in the Mekong Delta province of Soc Trang that have good soil, after equitisation, it would be possible to consolidate and exchange plots to make larger sample fields.
In contrast, with infertile and arid soil in the northern provinces of Son La or Bac Giang, it would be possible to develop high-yielding corn and soybean areas, and not necessarily special fruits.
How urgent is it to make adjustments and guarantee a smooth restructuring?
Vietnam’s economic potential has been eroded after the pandemic, but it is still relatively diverse thanks to increased connectivity. The problem now is that many factors need to be calculated more efficiently.
Vietnam’s average growth rate of 6 per cent does not compare to many countries in the region, such as South Korea, whose economic growth was higher than 7 per cent for many years. Without quickening the growth speed, Vietnam will not be able to catch up. However, growth must be accompanied by quality and sustainability in the economy, environment, and society. This perspective requires comprehensiveness, both in economic restructuring and institutional reforms.