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Competitive edge key to success
Economists and investors agreed in Ha Noi yesterday that Viet Nam could not avoid the global economic crisis, but were confident the impact could be minimised if competitiveness was strengthened and domestic investment efficiently maximised.
Sustained competitiveness was vital for Viet Nam to ensure it met its planned growth targets, international law firm Freshfields Bruckhaus Deringer senior lawyer Jerome Buzenet told the gathering hosted by the National Assembly’s Economic Committee.
Dragon Capital Group Chief Executive Officer Dominic Scriven said the world-wide crisis had heavily reduced capital flow into Viet Nam.
As an investment-dependent economy, Viet Nam should turn to its domestic financial sources in response, he said.
Dragon Capital Group is a long-term investor in Viet Nam.
Viet Capital&Securities joint-stock company (VCSC) research delivered at the seminar shows the global insolvency crisis has struck Viet Nam a full blow.
The result will be a drastic fall in exports and investment capital while unemployment will increase.
"There’s no doubt about this trend as consumption world-wide has plummeted markedly and most of Viet Nam’s trade partners are falling into recession," warned VCSC general director To Hai.
The VCSC research estimates that capital investment in the world’s emerging markets, which include Viet Nam, will shrink by about US$100 billion this year.
It estimates the maximum foreign investment Viet Nam can secure at $6-8 billion – much lower than the Government’s target of $20 billion.
Worse, several of the 10 biggest foreign-investment projects that were committed for Viet Nam last year – 73 per cent of the total – were likely to be delayed, Dragon Capital’s Scriven said.
He suggested more favourable and transparent financial policies as the way to have domestic investors put their money into the market.
While Viet Nam government bonds were an important source of investment, investors were not attracted to them, he said.
But interest rates set through the volume of bids, rather than the fixed interest rates that now apply, would stimulate the market.
The 9.5 per cent paid to buyers of Vietnamese government bonds sold in US dollars overseas was not attractive enough to potential investors and choosing the time to call for bids was important, he said.
National Assembly Economic Committee deputy chairman Vu Viet Ngoan, who presided at the meeting, applauded the suggestion.
State Bank of Viet Nam Deputy Governor Nguyen Dong Tien said the CEO’s suggestion that use of the central bank’s prime rate as the basis for the setting of commercial-bank lending rates should be abandoned was worth examination.
But any change "also depends on the laws on which this policy is based and the priority the Government has given to the issue," he said. (See story "Banks urge lift to cap on lending rates" -page 15).
Senior lawyer Jerome Buzenet of Freshfields proposed a 12-pronged solution to meeting the crisis and taking advantage of any opportunities that arise from it.
These included honouring the World Trade Organisation (WTO) commitments; accelerating the equitisation of State-owned enterprises and upgrading infrastructure.
Other goals should include continuing the fight against corruption; improving the legal system and transparency and strengthen the banking industry.
VNS
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