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"Opportunities and solutions to overcome the crisis": Discussion
The global financial crisis and economic recession have been affecting Vietnam’s economy directly. The national economic growth rate of 2008 and the first four months of 2009 declined compared to the last year. There are lots of difficulties and challenges but also big opportunities for the country. Nhan Dan newspaper organised a discussion entitled ‘Opportunities and solutions to overcome the crisis’ on May 19.
The discussion aims to collect opinions of managers, scientists and economic experts on analysing and appraising opportunities from the crisis in combination with proposing solutions to take advantage of these opportunities to take the national economy out of this difficult time for sustainable development.
The speech by the CPV Central Committee’s member, the editor-in-chief of Nhan Dan newspaper Dinh The Huynh proposed that managers, scientists and representatives of organisations and enterprises focus on some issues like analysing and forecasting the fluctuation of the world economic situation and its impacts on Vietnam’s economy in the coming time. It is also advisable to make clear opportunities from the global financial crisis and economic recession and draw experience from the previous economic crises. Also, solutions should be given to take advantage of opportunities and cope with the global economic crisis flexibly and effectively. Among them, several solutions are paid much attention to such as: economy restructuring, equipment and technology renovation, administration reform, labour restructuring, infrastructure building, domestic market development; enterprise reform and human resource training.
Impacts of the world economic crisis
According to Associate Professor and Dr Dang Van Thanh, the senior expert of the National Assembly, the global economic crisis has been creating obvious impacts on Vietnam’s economy: the decrease in production and businesses, the reduction of consumption, the stagnancy of goods; the decline of consumer price index (CPI); the fall of foreign investment…As a result, people’s lives and jobs are being affected directly. Real figures have shown that: the economic growth rate of the first quarter of 2009 only gained 3.1%, the lowest rate against previous years; the state budget revenue is also lowered compared to the same period last year; export turnover declined 13.4% against the same period…
Vietnam’s model for economic development during previous years was external orientation model, depending much on exports (around 60-70% of GDP) which is easily vulnerable to instability. The economic growth is mainly towards the width. As calculated, if the average economic growth rate of the 1998 – 2002 period is 6.2%, the factor of collective productivity only contributes 1.4%; and if the growth rate of the 2003 – 2008 period increases by 7.89% then collective productivity contributes 2.07%. This has proved that the quality of the economic growth rate is yet to be high and to direct to the in-depth growth. The increase in quality of labour, machine and technology and the roles of management and production are yet to match the economic growth rate.
Dr. Tran Du Lich, the member of the National Assembly’s Economic Committee, the deputy chief of the National Assembly’s delegation from Ho Chi Minh City said that during the past two decades, crises from small to big scale in the world are all due to ‘bubble’ of the real estate markets. US financial market’s collapse originated from the substandard real estate credit market which created ‘bubble’ from real estate equitisation tools. In early 2008, the world market saw a ‘fire storm’ which is the extraordinary increase in prices of 3 key commodities groups: fuel, foodstuff and metal. Whereas, the financial market began to show signs of ‘frozen’ in pre-crisis period. Vietnam’s economy was put into pressure of ‘ice’ and ‘fire’, along with shortcomings of economic structure and weakness of management and operation. As a result, the economy had to face with extreme difficulties in the first half of 2008. From this real situation, it is required to appraise seriously the role of the State in managing the socialist-oriented market economy in the context of deeper integration with the global economies in both management content and methods.
This crisis has exposed the weakness of Vietnam’s model for economic growth. Professor Michel Porter, the author of the Competition Theory, reckoned that Vietnam’s growth model has reached its peak. If the rapid growth is based on the expansion of capital scope, low added value and cheap labour, then it is hardly to compete and getting more and more difficult. The growth model which is being pursued is really the trap of the unsustainable development. It is advisable to draw the lesson ‘opportunities’ among ‘challenges’. That means we can ‘change challenges into opportunities to restructure the economy’. It is necessary to conduct a ‘major surgery’ on the economy, not to stop at a ‘first aid’ by situational measures, even though these measures are necessary to prevent the decline of the growth rate in the immediate future.
Opportunities raised in the crises
At the discussion, many opinions said that: through this crisis we have a chance to appraise and recognise ourselves more clearly and objectively.
Dr. Le Dinh An, the Director of the National Centre for Socio-Economic Information and Forecast under the Ministry of Planning and Investment affirmed that this time Vietnam is approaching a big opportunity . If we do not take advantage of this opportunity to restructure and surmount the internal weakness of the economy, it is hard for Vietnam to develop rapidly and sustainably. The world economic – financial crisis is indeed an opportunity for the Government to put forth policies to improve the quality of the domestic human resource, train and retrain human resource in conformity with the needs of the labour market. If we do not take full advantage of the opportunity or make effective plans on the labour quality improvement, we will waste resource and lag behind. Recently, in the context of globalisation and international economic integration, Vietnam’s human resource has not met the full requirements of the projects. Regarding the aspect of environment, Dr. Le Dinh An said that this is also an opportunity for Vietnam to solve environmental problems and ensure the economic growth in association with environmental protection for sustainable development. If there are not appropriate solutions to protect the environment, environmental solution rate will increase threefold to fourfold against the double increase in gross domestic product (GDP). Environmental pollution is a big challenge to the development process of Vietnam. Even a powerful economy can be affected seriously without paying appropriate attention to environmental protection and expenses on environmental issues can reduce the growth achievements.
The General Director of the State Capital Investment Corporation, Tran Van Ta analysed that this crisis time is a chance for domestic enterprises to restructure in order to meet the needs on a short-term and long-term basis. Also, prices of materials and equipment in the world market decrease by 30 – 40%. If enterprises can take advantage of opportunity to import equipment and technology then they can reduce investment cost. However, domestic enterprises are now having a very poor resource. So, it is advisable to focus on restructuring enterprises, investing capital on key businesses and narrowing risky fields like securities, real estate, insurance, finance…
Dr. Nguyen Dinh Cung, the Deputy Director of the Central Institute for Economic Management pointed out that there are opportunities in crises . Initially, we have to identify our weaknesses and shortcomings objectively and later find out causes and solutions to develop on a short and long-term basis. To cope with economic recession, we have released supported interest rate, lowered tax, rescheduled tax duration…which helped enterprises cut cost and have less difficulties. The crux of the problem is that it is needed to carry out all solutions seriously, decisively and unitedly to achieve the highest effect.
Mr. Nguyen Manh Hung, the deputy general director of the Military Telecommunications Corporation (Viettel) said that Viettel had applied the way of taking advantage of opportunity from crisis to promote internal strength for development in the late 1990’s of last century. In 1997, foreign telecommunications businesses faced with difficulties and had to reduce investment and even sell their equipment and technologies. Those technologies were bought by Viettel with lower prices and four-year deferred payment. Viettel bought 4,000 base transceiver stations (BTS) to develop the mobile phone network in rural market. As a result, the growth rate of Viettel has always been standing at high level in the previous years. Viettel expects to get turnover up 30% in 2009. Viettel always takes initiative in their business strategy. To take advantage of opportunity in the current crisis, Viettel is launching their business in foreign countries.
Proposals of solutions to taking advantage of opportunities
Dr. Phan Dang Tuat from the Institute for Industry Policy and Strategy under the Ministry of Industry and Trade stressed that in general, we should direct the economic stimulus into issues as followed:
Firstly, restructuring the industrial sector and developing supporting industries. This should be carried out according to two directions: synchronously implementing such policies relating to investment, finance, labour, wage...which aims to encourage industries with high added value, energy-saving and environmental friendliness as well as focusing on the development of the supporting industries. Secondly, developing the human resources for new industries to guarantee a quick recovery after the crisis. This is considered as the solution to dealing with the labour redundancy at the moment as well as the strategic preparation for the post-crisis period. We need a scheme for training human resources for new industries to meet the requirement in each period of development of each certain industry beside supporting industrial enterprises in training human resources.
Dr. Vu Dinh Anh also added that from the lesson of the financial crisis in Asia in 1997, the country could overcome crisis and sustainably develop if we took advantage of opportunities, quickly restructure the economy and the enterprises. For the time being, materials and equipment are at low prices. If productivity of businesses is raised by investing in production line and equipments, then investment cost will be reduced. However, we still need a vision on restructure, investment portfolio should be double-checked. As for exchange rate, a flexible and careful policy can help prevent the risk of inflation again.
Dr. Nguyen Quoc Huy, former Chairman of the Government Office focused on the subject of poverty reduction for 61 (now 62) poor districts nationwide until 2020. The problem of poverty in Vietnam would have been basically solved by the time the programme completes. There is no specific data but it is estimated that the total investment for the programme could be put at US$ 8-10 billion (VND 2-3,000 billion on average for each district).
Dr. Nguyen Quoc Huy also added that in the context of high inflation and interest rates, the economic stimulus used as a measure to curb economic slowdown is something like working on a rope. It requires a flexible way in handling issues.
In another respect, the Head of the Department for Planning and Investment under the Ministry of Transport confirmed that this year the transport sector's demand on disbursement of basic construction capital will see a sharp increase (about VND 30,000 billion). Due to the Government's agreement to pay for upcoming years plus bonds and extra disbursement, the transport sector will focus on the construction of highways, seaports, airports and other important urban and rural traffic works.
Dr. Nguyen Minh Phong, Head Department of Economic Study, Hanoi Institute of Social and Economic Development proposed that the current financial crisis and economic slowdown show that the drawbacks of the free market be doen away with an active interference of the State to let the objective economic rules move in the interests of the society. The world is in need of a new way in the journey to seek the role, to determine a suitable dosage and interventional tools of the new State model which represents for the common interest of human being. In such a sate model, there will be higher requirement of the role of law and the state's sanctions and regulations to control market institutions and credit loan; establishment of an open and transparent information system, development of forecast tools; punishment of fraudulent actions... in order to meet the requirements and interests of the market but not to worsen the micro economic stability; help guarantee harmoniously the interests in the process of development, especially not to put all the burdens from the crisis on the people's shoulders.
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