NA pushes for dramatic pro growth policies

May 27, 2013 | 14:35

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The National Assembly is demanding more policies to spur growth while maintaining the pursuit of stabilising the macro-economy.

The National Assembly (NA) gathering last week saw Deputy Prime Minister Nguyen Xuan Phuc read a governmental report on socio-economic development of 2012 and 2013 which states that: “Based on 2013’s socio-economic development targets and tasks, and the recent months’ situation, the government’s key task in the coming time is to continue consistently strengthening macro-economic stability, controlling inflation and reaching a growth level higher than that in 2012.”

Stabilising the macro-economy and curbing inflation have over the past several years been consistently focused in the government’s macro-economic monitoring.

However, the National Assembly Economic Committee last week noted that the government should now lay more priorities on boosting growth than on taming inflation.

“The target of 6 per cent for inflation this year is feasible because of the economy’s low demand,” the committee’s chairman Nguyen Van Giau told the 13th National Assembly’s fifth session, which was kicked-off last week and will end on June 20.

Echoing Giau’s argument, Deputy Minister of Planning and Investment Cao Viet Sinh stressed that the confidence of consumers and investors was declining. “Consumers tend to save their money, while investors tend not to boost their investment. They can boost investment if they have good output markets. I think the inflation target will be achievable,” Sinh said.

Deputy Prime Minister Phuc underscored the urgent need to revitalise local production: “Removal of enterprises’ difficulties and increase of purchasing power must be focused.”

He said all cumbersome administrative procedures would be simplified and all state officers vexing enterprises would be punished strictly. Capital would be focused on prioritised sectors. The government would also be more active in solving bad debts and find ways to increase credits to a rate of 12 per cent in 2013.

The State Bank reported that credit grew only 1.4 per cent in this year’s first four months. Meanwhile, the non-performing loan (NPL) rate was 7.8 per cent by late 2012. Credit organisations reported the rate was 4.51 per cent by late March, 2013. The National Assembly Economic Committee reported that NPL increased 64 per cent last year, against 2011.

In his opening speech at the session, National Assembly Chairman Nguyen Sinh Hung said Vietnam’s macro-economic situation remained unstable, with many sectors facing great difficulties.

“The restructuring of the banking system and the settlement of bad debts are slow, while inventory remains big. The number of enterprises with stopped operations, dissolution or bankruptcy continue to increase, and employment, incomes and life on the part of labourers are facing difficulties,” Hung said.

More than 76,800 enterprises have either stopped production or declared bankruptcy since early last year. Some 69 per cent of enterprises nationwide declared losses last year, in which Hanoi saw 46,000 out of its 90,000 enterprises suffer from a loss of VND47 trillion ($2.26 billion).

In this year’s first quarter, the economy grew 4.89 per cent on-year. But the rate was made possible thanks to on-year high growth of the service sector’s 5.65 per cent which held 2.6 per cent out of this 4.89 per cent. The on-year growth rates of the agro-forestry-fishery, and industrial and construction sectors were 2.4 and 4.93 per cent, respectively, both far lower than that in the same periods of the previous four years.

Tran Dinh Thien Head of Vietnam Economics Institute

It will be difficult to boost growth due to the economy’s weak absorbability of capital and low state budget revenues and expenditures. The prime task now should be to address non-performing loans, not boost growth. Over the past two years, the government and localities have owed enterprises about VND100 trillion ($4.8 billion), half of which are overdue debts. Many enterprises have to borrow capital from banks at high lending rates to implement the government’s projects. However, they have yet to be paid by the government. Thus, the government should earmark about VND50 trillion ($2.4 billion) to pay enterprises, helping boost enterprises’ demand for production.

Dinh Thi Bach Mai National Assembly delegate

The government needs to further enhance its role of leading the economy. Vietnam’s economy has become all the more difficult with an increase in enterprises with stopped operations or bankruptcy. However, amid such difficulties, there has been laxness in state budgetary management. Many ministries and localities are wasting the state’s money. The more difficulties we face, the more seriously public investment management must be conducted. However, we cannot find any sturdy solutions in the government report. We want the government to take more sturdy actions.

Economist Tran Hoang Ngan National Assembly delegate

In 2010 more than 43,000 enterprises ceased operations or declared bankruptcy. The figure was more than 53,000 in 2011 and about 54,200 in 2012. In this year’s first three months, there were about 20,000 enterprises facing the same fate. I would say that the situation of enterprises’ ceased operations or bankruptcy has become an epidemic. I see that the revitalisation of enterprises has become urgent more than ever. Signals of economic decline have become very clear.

However, there have also been some bright points in the economy in this year’s first months, such as curbed inflation and stable market prices which have helped make people’s lives less difficult, and improved their confidence in the government’s macro-economic monitoring. However, the government needs to do more to revive people’s confidence.

Economist Tran Du Lich National Assembly delegate

It would be very difficult to see high inflation from now until the year’s end due to a sharp decrease in demand of the economy. This has offered an opportunity for harmonising the inflation curbing and policy loosening, which is aimed to boost production. However, the loosening must be flexible enough so that high inflation will not return, as the government did successfully in 2009 and 2010.

At present, the economy has suffered from a six-year decline. Previously the economic growth depended on four pillars: namely agriculture, state-owned enterprises, private domestic enterprises and foreign invested enterprises. However, in between 2012-2013, the economic growth largely relied on growth of exports from foreign enterprises. This reflects the fact that the state economic sector and private domestic economic sector are losing their competitiveness to foreign enterprises.

By By Thanh Dat

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