Over the past two decades, never before have the National Assembly (NA) and the government been tormented by such difficulties as they are facing now in macroeconomic monitoring
“Domestically, the most recent COVID-19 outbreaks appeared with a new variant that has spread more quickly and more dangerously. Its increasingly complicated developments became difficult to control and negatively impacted all sectors in the economy, seriously hurting business and production activities, as well as livelihoods,” NA Chairman Vuong Dinh Hue told the second session of the 15th NA which kicked off last week and is scheduled to conclude on November 13.
“Economic growth fails to meet the set target. It is estimated that the economy may grow 2.5-3 per cent this year, lower than the target of 6 per cent earlier set by the NA,” he said. “Some supply chains have broken down and been disrupted, while many enterprises have had to stop operations or go bankrupt, especially those in the sectors of trade, services, and manufacturing in Ho Chi Minh City and key economic hubs.”
Worse, the total-factor productivity ratio in GDP is expected to stand at 32 per cent this year, far lower than the set target of 45-47 per cent.
Under the government’s calculations, the economy’s structure is changing at a snail’s pace and “fails to meet requirements”. Specifically, the service sector’s ratio of GDP is estimated to be 41.2 per cent in 2021, down from 41.9 per cent last year. The rate may be 12.3-12.4 per cent for the agricultural sector, equal to that in 2020, while the industrial and construction sector’s ratio is estimated to sit at 37.5-37.6 per cent, up from 36.9 per cent last year.
“The service sector suffers the most from COVID-19, especially tourism, hotels, catering, and transportation,” Prime Minister Pham Minh Chinh told the NA. “In the first nine months of this year, Vietnam was visited by just over 114,000 foreign tourists, down 97 per cent on-year.”
Needing greater efforts
The government admitted that lower-than-expected economic growth will surely pressurise the implementation of economic goals and the whole Socioeconomic Development Plan for the 2021-2025 period.
It is expected that in 2021, total GDP will be about $364.8-366.5 billion, higher than $346.3 billion of last year but still lower than the year’s target of about $391.3 billion. The figure is expected to be as much as $396.5-398.7 billion next year when the economic growth rate is set to be about 6-6.5 per cent.
Some goals earlier set for the whole of 2021 are expected to be out of reach (see box).
Expressing his concern over the current economic situation, Party General Secretary Nguyen Phu Trong stated in his closing speech at the fourth plenum of the 13th Party Central Committee on October 7 that all efforts must be made to soon remove difficulties for enterprises and the public so that business and production activities can bounce back as soon as possible. “There must be sturdy solutions to protect enterprises in the economy’s key sectors, and to curb the collapse of major economic groups, both state-owned and privately-owned, as this can lead to a domino-effect breakdown in the economy. We cannot let our economy lag behind in the global economic recovery trend and the global process of restructuring production chains and supply chains,” he said.
Estimate figures from the Ministry of Planning and Investment showed that Vietnam’s index for industrial production for 2021 may increase 5.6-6 per cent, higher than 3.4 per cent last year, if COVID-19 is well controlled in the fourth quarter and vaccination is accelerated.
Production goals of many key industrial sectors are expected to witness an on-year reduction this year, such as footwear (280 million pairs versus last year’s 288 million pairs), casual clothes (4.2 million units against last year’s 4.45 million units), TVs (15.7 million units, equal to that in 2020), cars (293,000 units, the same as in 2020), motorbikes (2,800 units, similar to last year), and mobile phones (215 million units against 220 million units last year). These items are estimated to create about 60 per cent of Vietnam’s gross industrial output.
Samsung Vietnam CEO Choi Joo Ho recently said that the group’s manufacturing facilities in Vietnam had already overcome all challenges of COVID-19 in the northern provinces of Bac Ninh and Bac Giang, adding that the Thai Nguyen complex was safe without a single COVID-19 patient. Samsung Vietnam reported 10 per cent growth on-year in revenue in the first seven months of 2021, and expects to exceed its export targets this year if its Ho Chi Minh City complex can resume production soon, according to Ho.
Samsung’s total export turnover reached over $56 billion last year in Vietnam, where the South Korean group has already invested over $17.7 billion.
According to a fresh survey by the General Statistics Office on business and production sentiment of nearly 5,700 processing and manufacturing groups and nearly 6,200 construction companies in the third quarter of 2021, only 13.2 and 25.4 per cent of respondents said that their performance in Q3 was “better than” or “as stable as” that in Q2, respectively. Up to 61.4 per cent of respondents said their performance in Q3 was “more difficult than” the previous quarter.
Fostering the private sector
“One of the biggest solutions to spur economic growth and forge new momentum for growth is to build bigger spaces for private businesses to develop, and create breakthroughs to attract local and foreign private investment capital,” stated PM Chinh. “We will quickly review all regulations to remove policy obstructions and reduce procedures and costs for business and production. There will also be flexible adjustment of the fiscal and monetary policies to continue macroeconomic stability and boost production and business activities.”
According to a report on strengthening the capacity of Vietnam’s private sector launched last week by the Central Institute for Economic Management within the Aus4Reform programme, currently, the private sector creates 43 per cent of GDP and employs 85 per cent of Vietnam’s workforce, featuring many major groups such as Vingroup, TH Group, BRG, and Truong Hai Auto Corporation.
“There are numerous opportunities in Vietnam to develop the private sector, whose enterprises can number 1.5 million and two million by 2025 and 2030, respectively, and the sector can create 55 and 60-65 per cent of GDP by 2025 and 2030, respectively,” read the report.
The number of private operational groups rose strongly from nearly 269,000 in 2010 to over 647,600 in 2019, and in the 2015-2020 period, the number was more than 735,000. In the first nine months of 2021, about 85,500 private enterprises were newly established, with the total registered capital of $52 billion, employing nearly 649,000 workers.
It is estimated that the number of newly-established private businesses will be about 110,000 this year. Currently, 97 per cent of enterprises in Vietnam are privately owned. Besides these, the private sector also embraces 5.2 million business households, of which only 30 per cent have business registration certificates and the remaining 70 per cent are operating without.
According to the political report – the most important document adopted by the Central Party Committee at the 13th National Party Congress held early this year, the private sector “is to be encouraged for development in all sectors not banned by the law, especially in production, business, and services. It is supported in developing major privately-owned companies and groups with high competition.”
“Private enterprises are encouraged to cooperate with state-owned enterprises, cooperatives, and households; and to develop joint-stock companies with the large participation of all entities,” the report added. “Foreign investment is an important part of the national economy, playing a big role in mobilising investment capital, technology, and modern management methods, as well as expanding export markets.”