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Vietnam urged to consider post-stimulus agenda
Vietnam’s stimulus package has proven effective but it’s time for the country to think about how the economy will fare without it, experts say.
As the economic situation has started improving, Vietnam needs to consider a roadmap to scale down its stimulus measures to ensure stable growth, Nick Freeman of the Asian Development Bank said at a conference in Hanoi Thursday.
If the measures end too early, the economy could “dip down again, like in the fourth quarter of 2008, or the first quarter of 2009,” he said.
But if Vietnam ends the stimulus spending too late, the economy could over-heat again like in the fourth quarter of 2007 and the first quarter of 2008 and face a return of high inflation, he warned.
Former Deputy Prime Minister Vu Khoan said if the measures last for a long time, local firms will not enhance their creativity and competitiveness.
“Our stimulus package is big but not focused,” he said. “We have to focus on supporting well-performing firms and important economic sectors.”
Stimulus spending that the Vietnamese government values at more than US$8 billion has helped drive credit growth in the country, spurring the construction sector’s recovery.
The economy is improving, Prime Minister Nguyen Tan Dung said recently in a statement on the government’s website, calling for topping a 5 percent growth target that has been revised down from the initial goal of 6.5 percent set earlier this year. Companies and ministries need to use stimulus spending more effectively in the second half of this year, he said.
Tran Dinh Thien, head of the Vietnam Economics Institute, said it is time to scale down the stimulus package and revise its structure, noting that the quality of stimulus spending is more important than the quantity.
It would be better to focus on packages which lay the foundation for long-term development, and overlook those that target short-term growth, Thien said.
Freeman said Thursday the end of the economic stimulus package is likely to coincide with preparations for the next socio-economic development strategy for the 2011- 2020 decade.
Vietnam should re-evaluate priorities and strategies of the past, and try to imagine how the global economy will change over the next decade, he said.
He said several important questions need to be carefully considered, including whether or not GDP growth should be the No. 1 goal, if an export-oriented economy was the still the best way to grow, what Vietnamese companies could do differently and how best the government can help them.
Freeman said Vietnam’s macroeconomic numbers have generally been improving since the second quarter of this year, so “we may have bottomed.”
However, a ‘V-shaped’ recovery is not automatic as Vietnam could bump along for quite a while, depending on the global economy, he said.
Speaking at another conference also on stimulus measures in Ho Chi Minh City Thursday, Peter Ryder, CEO of Indochina Capital Corp., said Vietnam’s economy is quite open, with exports accounting for about 70 percent of its GDP.
Ending or cutting down the stimulus package could make the country’s recovery vulnerable, he said.
The more important issue in the post-crisis time is what would happen at the end of the package, Nguyen Nam Son, managing partner of Vietnam Capital Partners Ltd told the conference in HCMC.
“I would say that it’s hard to make a quantitative analysis [of the package],” Vu Thanh Tu Anh, senior economist and research director of the Fulbright Economics Teaching Program in Vietnam, said.
“The stimulus measures might have created some bubbles. The ending of stimulus would cool down the stock and real estate markets,” he said.
Trinh Hoai Giang, deputy general director of HCMC Securities Corporation, said although securities firms are still expected to be profitable next year, their net earnings could drop when the stimulus comes to an end.
Anh said in some countries like the US and EU members, stimulus measures mean the start of economic restructuring.
“Although the economic restructuring has already started in Vietnam, I’m still cautious about making predictions about its success,” he said.
“I would suggest an economic restructuring process upwards from the lowest level, not a normal top-down method, due to the lack of cooperation among government agencies and a complicated administrative system,” he added.
Economist Pham Chi Lan said in order to reach the same level of economic development as Thailand and Malaysia, Vietnam must focus on the links between state-owned corporations, private companies and foreign-invested enterprises.
Truong Dinh Tuyen, former Minister of Trade, said transparency and anti-corruption efforts must remain key issues for the post-crisis period of economic development.
“Anti-corruption here is not just a moral issue because corruption will continue to hinder the country’s sustainable development,” he said.
A fair competitive business environment must be created for domestic and foreign firms alike, he added.
Ngan Anh - Vinh Bao
thanhnien
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