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Economic slump renders attention to domestic market: Officials
Officials say Vietnam should take advantage of its rapidly expanding domestic market to facilitate economic growth, after the downturn is over.
The global economic recession has shed attention to the domestic market, which has been neglected for years, said Deputy Minister of Industry and Trade Nguyen Cam Tu. “We should take the domestic market as a foundation to re-emerge.”
Tu was speaking at a workshop themed “Options for Vietnam Economic Recovery in the Aftermath of the Global Financial Crisis” held in Hanoi on Thursday.
Relevant agencies should improve their forecast abibilty, the efficiency of the domestic market management, choose appropriate tactics when dealing with market organization, and support low-income earners in buying domestically-made materials for production, he said.
Former Deputy Prime Minister Vu Khoan said: “During the crisis, we have attached further importance to the domestic market. In the post-crisis period, this should not be neglected, but be regarded as a long-term and basic strategy.”
Comprehensive measures, such as raising consumer awareness, improving the design and quality of products, lowering prices, setting an appropriate exchange rate, and widening distribution and promotion systems, should be established, he said.
With the world’s 13th-largest population, Vietnam has a large domestic market whose purchasing power is rising greatly.
According to figures from the General Statistics Office, retail sales reached US$58 billion last year, a 31 percent year-on-year increase.
Retail sales in the country grew 20 percent year-on-year in the first six months of 2009 to VND547 trillion ($32 billion), the Ministry of Planning and Investment said late last month.
Pham Gia Tuc, vice president and general secretary of the Vietnam Chamber of Commerce and Industry (VCCI), said firms should increase their cooperation to hold bigger shares in the domestic market.
He has also urged firms to pay attention to tapping rural markets, where two-thirds of the country lives. The cooperation among firms in conducting marketing campaigns, and directly selling products to rural consumers has been considered steps in the right direction.
Vice Chairman of the National Financial Supervisory Commission, Le Xuan Nghia, said the most important strategy in the post-crisis period is to build a new trade program that strikes a balance between developing the domestic market and boosting exports.
Export promotion
Export prices of some commodities, including agricultural products, are forecast to keep decreasing due to the diminished global demand.
Deputy Minister Tu said firms are facing difficulties in expanding export markets when key markets like the US, the European Union and Japan, which account for 60 percent of Vietnamese exports, have lowered their imports.
Tu said the government should take stronger measures in trade promotion, offer preferential tax policy, and urge firms to increase their competitiveness.
Exports fell 10 percent to $27.6 billion in the first six months, but in May and June exports grew 3.2 and 6.5 percent month-on-month, figures from the Ministry of Planning and Investment showed.
At the Thursday’s workshop, representatives from the Economics University under the Hanoi National University warned about challenges in human resources in the post-crisis period.
The country’s human resources may not meet the demand of both local and foreign firms, especially for high-level staffing. There may be a movement among employees from the state sector to the private one, they said.
Thus, it is necessary to increase the capacity to forecast human resource supply and demand, improve information surrounding the issue, and intensify work training, the representatives said.
Tran Dinh Thien, head of the Vietnam Institute of Economics, said the global recession, the worst since World War II, would create significant changes in the world.
The most important thing that Vietnam should remember when restructuring its economy during the post-crisis era is to avoid falling into the middle-income trap like some other economies in Southeast Asia, Thien said.
These economies used to be hailed for their achievements in the 1970s and 1980s but then they got stuck in the trap and are still struggling for a way out, he noted.
During the post-crisis era, Vietnam will need to adopt advanced technologies, and any old-fashioned mindsets that may hinder the process must be changed, the economist added.
Inflation worries
Former Deputy Prime Minister Khoan said there are worries about the possibility of accelerating inflation because of the increasing budget deficit and loosened monetary policies.
It is therefore necessary to map out plans to curb budget deficit, increase the efficiency of public spending and flexibly adjust the exchange rate, Khoan said.
Nghia said: “Inflation is estimated at some 6 percent in 2009, and 9-10 percent in 2010. This is a worrying problem.”
The State Bank of Vietnam, the central bank, should retain a stable exchange rate until the end of this year, and then flexibly adjust the rate to control inflation, he said.
Vietnam may struggle to prevent inflation from accelerating this half as gains in raw material and commodity prices gather steam, Indochina Capital Vietnam Holdings Ltd. said.
“Keeping inflation down remains a challenge for the rest of the year,” Indochina said in a monthly update to investors. Electricity, fertilizer and gasoline prices have increased recently and economic growth is accelerating, Indochina said.
Vietnamese consumer prices rose 3.9 percent in June from a year earlier, the slowest pace in five years. Inflation pressures may now be starting to build as prices rose 0.6 percent in June from May, the biggest gain since February.
Inflation may accelerate to as fast as 9 percent by the end of the year, said Beat Schuerch, the Ho Chi Minh City-based chief representative of Indochina Capital Advisors Ltd., which manages the UK-listed fund. Inflation may reach 11 percent by mid-2010, HSBC Holdings Plc said Wednesday.
“It depends on commodity prices, but certainly there is more consumption, more demand,” Schuerch said in an interview Thursday. “And the full impact of the stimulus measures is going to be felt by the economy in the second half of the year.”
Vietnam’s economy grew 4.5 percent in the second quarter from a year earlier, up from 3.1 percent in the previous three months, the statistics office said last week. For the first half, gross domestic product expanded 3.9 percent.
The economy is improving, Prime Minister Nguyen Tan Dung said in a statement posted Tuesday on the government’s website. The statement called for topping a 5 percent growth target, which had been revised down earlier this year from an initial goal of 6.5 percent.
Central bank’s Deputy Governor Nguyen Toan Thang said, it is necessary to be cautious in implementing monetary policies. He warned that high inflation is possible, after the country has loosened the policy to combat the economic slowdown.
Fiscal policy should also serve the aim of gradually reducing the state budget deficit, so that it can be stand below 5 percent, as in the prior-crisis period. It is best to strike a balance between state budget collection and spending, he said.
Ngan Anh
thanhnien, Bloomberg
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