Experts warn of challenges to Vietnam economy despite good prospects
Updated : Thursday, May 17, 2018 2:56 PM (GMT+0700)

Vietnam’seconomy had a good start in 2018 with a 7.38 percent GDP growth in firstquarter, but experts warn of challenges and risks ahead in the remaining of theyear as well as following years. 

 
Participants at the workshop - Photo: VNA

At a recent workshop onprospects for the Vietnamese economy in 2018 and to 2020, Minister of Planningand Investment Nguyen Chi Dung said the country will benefit from the recoveryof the world economy this year and there are many reasons to be optimisticabout domestic economic growth from now to 2020. 

The advisory group to thePrime Minister on economic affairs said economic development in the recent pastwas driven by reform efforts with drastic measures, which improved the businessand investment environment, along with flexible and coordinated macro-economicpolicies and the effect of new policies such as developing the privatesector. 

The group devised threescenarios for Vietnam’s economic growth in 2018-2020, which envision annualaverage GDP growth rate at 6.7 percent, 6.83 percent and 7.47 percent,respectively. The group also proposed the target of an average annual growth of6.85 percent for the next three years (2018 to 2020). 

The forecast demonstrateseconomists’ optimistic viewpoint of the country’s economic prospects. 

However, in-depth analysisof Quarter 1 economic performance also revealed potential problems,participants at the workshop said. 

It is noteworthy that thehigh economic growth in Q1 was driven by the manufacturing sector, especiallybig foreign-invested enterprises such as electronics manufacturer SamsungVietnam and steel maker Formosa Ha Tinh. The question is whether thoseenterprises will be able to maintain the high growth rate in following quartersin the context of unforeseeable factors in the world economy such as the tradeprotection policy of the US and the risk of a US-China trade war. 

Economist Le Xuan Nghia saidthe manufacture sector is currently dominated by foreign-invested enterprises,and the domestic enterprises are saddled with high interest rates, logisticcosts and informal expenses.  

In particular, theenforcement of laws and policies is not strict enough, many documents guidingthe execution of laws and decrees are inconsistent, incomplete and lacktransparency, and administrative procedures, especially those related to landand investment in capital construction, reveal many shortcomings. 

Phan Duc Hieu, DeputyDirector of the Central Institute for Economic Management, was of the opinionthat despite certain results, the pace of institutional reform is still slowand fails to meet expectations of the business community.  

The restructuring of theeconomy also fell short of expectations, Hieu said.

He added that it isnecessary to change the way of thinking not only among policy makers but alsothose who implement the policies. 

“Changing the way ofthinking throughout the administrative apparatus is an important content ofinstitutional reform”, Hieu said. 

Minister of Planning andInvestment Nguyen Chi Dung shared the view on the need to accelerateinstitutional reform. 

“This is the fundamentaldriving force of economic growth, which is both an urgent need in the contextof rapid changes and a requirement for development”, he said.  

Speaking on the Government’sreform priorities, the minister also highlighted the need to increase labourproductivity, stressing that this is the most important factor in improvinggrowth quality and renewing the growth model. 

According to the Minister,the most effective way to enhance labour productivity is to capture opportunitiesbrought about by the 4th Industrial Revolution. 

“This is one-in-a-thousand-yearopportunity”, Dung said. 

He also mentioned otherfactors that can contribute to economic growth, such as infrastructure andhuman resources. 

“There is plenty of room forimprovement, and the question is how to improve in the most rapid and effectivemanner”, the minister said.

He agreed that in spite ofthe optimism, challenges and difficulties should not be overlooked.

Source:VNA

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