To maintain and increase economic growth momentum

(Baonghean) - With an estimated gross domestic product (GDP) growth rate of 6.28% in the first half of 2015 - Vietnam's highest first-half growth rate in the past 5 years, it seems that the Vietnamese economy has truly recovered to enter an acceleration phase to achieve an average growth rate of 6.5% in the next 5 years, as affirmed by Prime Minister Nguyen Tan Dung.

The economy has a clearer market orientation

Remember, at the 2014 annual Vietnam Business Forum, Prime Minister Nguyen Tan Dung said that Vietnam will ensure more stable macro-economy. Accordingly, in 2015, the Government will proactively control inflation below 5%, exchange rates and interest rates will be stable to facilitate economic development. The deficit will decrease from 5.3% in 2014 to 5% in 2015. Public debt will be safe, not exceeding the allowable ceiling, and the Government will handle public debt more effectively, ensuring timely debt repayment. Bad debt will decrease to 3%. In that context, Vietnam is expected to achieve GDP growth of 6.2% in 2015 and this is a feasible index. In the next 5 years, with the 5-year plan (from 2015 - 2020), the Government has set a target of increasing GDP at an average rate of 6.5%/year. Thus, the set goal is very clear, the remaining problem is what to do and how to do it to achieve the socio-economic growth goal.

Milk packaging line at TH Milk Factory (Nghia Dan). Photo: Dao Tuan

According to the report "Vietnam Economic Development Update in the First 6 Months of 2015" by the World Bank (WB) in Vietnam released on the morning of July 20, Vietnam's economic growth in the first 6 months of 2015 reached 6.28%, and this recovery was mainly due to positive performance in the processing, manufacturing and construction industries, which contributed half of the total GDP growth in the first 6 months of the year. The WB also said that this result was partly due to the State Bank of Vietnam gradually loosening monetary policy in the context of low inflation, to support economic activities, and at the same time adjusting exchange rates to ensure the competitiveness of the economy. Total retail sales of goods and service revenue also grew strongly, reaching 8.3%. Meanwhile, the service industry in general (which contributes nearly 40% to GDP) only achieved a modest growth rate of 5.9%, partly due to the tourism industry. struggling as foreign arrivals fell 11.3% year-on-year. The agriculture sector grew by just 2.4% amid falling prices and unfavourable weather.

The WB report also pointed out the limitation of the Vietnamese economy is that the progress of structural reform has not been commensurate with expectations, especially in the restructuring of state-owned enterprises (SOEs) and partly in banking reform. According to the WB, the pace of restructuring SOEs seems to be slowing down, and the strict implementation of legal and regulatory provisions on management and governance of SOEs, increasing the ownership ratio of the private sector in equitized SOEs should continue to be considered a key priority. “Banking reform has made progress, especially in the area of ​​mergers and acquisitions. Many mergers and acquisitions of small banks have been carried out by large commercial banks. However, the lack of a comprehensive and appropriate legal framework for handling bad debts, while VAMC has small capital and limited capacity, continues to be an obstacle to handling bad debts - commented by the WB's Chief Economist in Vietnam, Sandeep Mahajan.

The report also covers Vietnam’s labor market, detailing the major shifts in the employment landscape over the past 25 years. It also provides recommendations for further transformation of Vietnam’s labor market, including proactive measures to strengthen the industrial labor relations system, balance ensuring labor market flexibility with sustaining productivity growth, and manage social risks in a more market-oriented economy. WB experts believe that Vietnam’s economic growth prospects are generally positive. Future forecast indicators suggest that the recovery will continue to progress, with economic growth forecast at around 6%.

Challenges of new generation FTAs

In 2015, for the first time, the Vietnamese Ministry of Finance organized a conference to review signed free trade agreements (FTAs), announcing new generation FTAs. After this event, a series of FTA propaganda activities were focused on by the Ministry of Finance, aiming to further promote to the people and businesses the strong and profound impact of FTAs ​​on Vietnam's socio-economic life. This is because the new generation FTAs ​​are expected to have a strong and comprehensive impact not only on the market development prospects of Vietnamese enterprises but also on the business environment and related policy and legal systems.

It can be seen that Vietnam is negotiating a series of new generation FTAs, notably the Trans-Pacific Partnership Agreement (TPP) and the Vietnam - EU FTA (EVFTA), which are expected to create a stronger second wave of integration for Vietnam, which has brought more optimism to the majority of Vietnamese enterprises. According to a survey conducted by VCCI in 2014 on nearly 10,000 enterprises, up to 66% of Vietnamese enterprises support and believe in the benefits that TPP brings. Another survey conducted by VCCI in June on EVFTA also gave similar results, with the majority of enterprises believing that EVFTA will bring positive impacts to business activities. With the characteristics of new generation FTAs ​​including many unprecedented deep commitments, including many institutional commitments, these new generation FTAs ​​will have commitments that directly and greatly affect domestic institutions and legal policies. Not only that, the new generation FTA partners are also particularly large, including Vietnam's leading trade partners such as the United States, the EU, and Japan. Therefore, it is necessary to fully recognize the accompanying challenges, and prepare the necessary and sufficient conditions to be ready to overcome them. Do not let the reality be like the past years, for many reasons, with most of the tariff incentives under the FTAs ​​already within reach, Vietnamese enterprises have only used about 30%, the remaining 70% have not had the conditions to successfully realize.

Need to take advantage of opportunities from integration

Thus, 2015 is considered the year that Vietnam actively and proactively integrates deeply into the international economy. This will be an important milestone year for Vietnam to be able to conclude or reach agreements with a series of bilateral and multilateral trade agreements (FTAs), such as the FTA with the EU, with Korea, the European Customs Union... and especially the TPP Agreement with the participation of 11 countries, especially large countries such as the United States, Japan, and Canada. If Vietnam successfully joins the TPP, its credit rating will increase, demonstrating the Government's success in stabilizing the macro economy, as commented by Wendy Werner, Director of the World Bank's Global Trade and Competitiveness Program.

In addition, the domestic market will open up more, bringing both benefits and challenges, but with new investment flows brought by agreements, the opportunity to help Vietnam move towards high income and development is huge. One of the core issues that the domestic and foreign business community is interested in and wants to improve is supporting businesses to take advantage of the benefits of free trade agreements (FTAs) that have been and will be signed, and the Government needs to be well prepared, active, and proactive in its commitments to join these agreements.

Seriously looking at the reality, although facing great opportunities to access international investment capital, how to absorb that capital is the key point of the entire domestic socio-economic system. Because there are still many difficulties and limitations, we need to do more, more drastically and more effectively to ensure rapid and sustainable integration and development. The core thing that Vietnam needs to thoroughly realize in the coming time is to continue to perfect the market economy institution, considering this a breakthrough. The Government will focus on administrative reform, improve the business environment, create all favorable conditions for enterprises to develop to improve labor productivity and competitiveness. In particular, the simplification of administrative procedures is increasingly popular along with the high sense of responsibility of civil servants as a mandatory requirement, which will create a new driving force for reform activities towards the people and enterprises.

In a recent move, on July 23, in Da Nang, the Inter-sectoral Steering Committee for International Economic Integration (Ministry of Industry and Trade) coordinated with the People's Committee of Da Nang City to organize a discussion to collect opinions on the project to strengthen information and propaganda work on international economic integration and disseminate some recently signed FTAs. Accordingly, focusing on groups of solutions to enhance the effectiveness of international economic integration has been of interest. Notable are the proposals to build a set of official information documents on international economic integration; the issue of training a team of reporters who are good at both professional qualifications and speaking skills; the issue of focusing on building a project aimed at the main target of small and medium enterprises; regularly updating information to support enterprises in accessing integration information; the issue of funding for propaganda work.

Obviously, information about signed FTAs ​​and directions for implementation and utilization, and notes for businesses to focus on the characteristics of markets signed in FTAs ​​are very necessary, and it is the job of state agencies to help businesses take advantage of the advantages when bringing goods to these markets in a suitable and convenient way, most beneficial for Vietnamese businesses and respecting international commitments.

Red River