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Balancing growth, inflation
The biggest challenge for Viet Nam in 2010 is to balance growth without fuelling inflation, while creating sustainable long-term solutions for the country, said EuroCham Director in Ha Noi Matthias Duehn.
The section of the East-West Highway across HCM City District 1 has been completed. Developing infrastructure is one of the cores ensuring the sustainable development growth for the country.
The section of the East-West Highway across HCM City District 1 has been completed. Developing infrastructure is one of the cores ensuring the sustainable development growth for the country.
Speaking at the "Global Economic Prospects in 2010" workshop, held by the World Bank yesterday, Matthias said that Viet Nam had made a strong rebound from the global downturn, achieving an impressive 5.32 percent growth rate last year (6.9 percent in the last quarter) and controlling its inflation, with a rate of 6.58 percent.
The remarkable achievements of the Vietnamese economy could be attributed to the Government’s sound and swift responses to the crisis, by implementing the stimulus packages.
However, since Viet Nam’s economy was still relatively small in scale, and businesses were very reactive to fiscal policies, Matthias believed that carefully tightening monetary policies and ending the stimulus would be a reasonable action.
"This will convey the important message that the companies are responsible themselves and the State only interferes in real emergency situations. Such an emergency scenario is no longer the case," he said.
Phan Chi Thanh, deputy director of the International Relations Department at the Government Office, told the conference that the National Assembly’s recent resolution had set targets on high growth rates, macroeconomic stability and low inflation as the three main missions this year.
The growth rate was projected to reach 6.5 percent, while inflation would be kept at 7 percent, which Thanh said would be managed through tightening monetary and fiscal policies. "Credit growth reached 37.7 percent last year, which is rather high. This year the Government has targeted credit expansion at 25 percent."
Hans Timmer, Director of the Development Prospects Group of the World Bank, said that increasing growth was shifting from high-income countries to middle - and low - income countries, and Viet Nam could take advantage of this global downturn to improve their production capacity and competitiveness.
He also stressed the importance of clear and predictable policies for the business sector, which would ensure business confidence and facilitate the development of new sectors.
Value-added exports
Matthias recommended that the Vietnamese Government focus on fundamental constraints to the economy’s competitiveness, instead of on short-term considerations.
Viet Nam’s exports were mainly raw materials, like oil and gas, leather and garments, rice and coffee. Matthias said that one of the keys to sustainable economic development was to shift from these basic exports to more sophisticated added-value exports in the long run, particularly in high-tech sectors.
Infrastructure, education and favourable Government policies were raised as the three core issues that Viet Nam needed to address, he said.
Tran Dinh Thien, Director of the Vietnam Institute of Economics, agreed on the persistent imbalance in development. "Markets for production inputs, like assets, property and human resources have grown slowly. Poor infrastructure has not been improved and the quality of corporate management is still far below the requirement."
He also noted the high ICOR (Incremental Capital Output Ratio), an indicator showing investment efficiency, which had reached eight last year, higher than that of some neighbouring countries.
The Government’s development plan this year would focus on restructuring the economy through increasing the efficiency of allocated resources, while continuing to reform State-owned enterprises, Thien said.
VietNamNet, VietNamNews
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