Oil tanks of Dung Quat refinery loom over poor families' homes along a river at Dung Quat industrial zone in the central province of Quang Ngai in a file photo taken in 2009. Photo courtesy of AFP
Pointing to several years of GDP drops and the messy distribution of resources, economists say Vietnam's goal of becoming an "industrialized nation" by the end of the decade is far-fetched.
"To become an industrial country in such a short time is too ambitious a plan," Tran Dinh Thien, head of the Institute of Economics, told Thoi Bao Kinh Te Saigon Online in a report Tuesday.
Thien said it was hard to find a modern country to serve as a model for Vietnam.
"The US is too high, so is France, and South Korea is also impossible as its GDP per capita is US$30,000 while Vietnam is just around $1,500."
He said it would even be difficult for Vietnam to catch up with its neighbor Thailand, whose GPD per head is around $8,000.
"We don't have an answer for what industrial country Vietnam should aim for."
Thien said businesses are the drive of a country's industry, but around 110,000 businesses in Vietnam had shut down over the last two years, some 25,000 in the first half of this year alone.
"The concerning thing is that those 25,000 businesses had managed to sustain the past two difficult years, but they can't anymore."
He said Vietnam's GDP growth has fallen steadily since 2007. It landed at 5.03 percent last year, a 13-year low.
The expert expressed concern over macroeconomic stability, saying inflation may seem under control, but it is likely to rise for the rest of the year given increases in minimum wages beginning July 1, and fuel and power price hikes that took effect last month. Fuel prices have reached an all-time high.
Minister of the government office Vu Duc Dam also told the newspaper that Vietnam's economy is falling behind other countries.
"We won't go forward without strong renovation and restructuring. It's not a just a risk anymore. Vietnam is really falling behind while other countries are developing very fast."
Privatizing profits, socializing losses
Vo Tri Thanh, deputy director of the Central Institute for Economic Management, said Vietnam's distribution of resources was ineffective.
Thanh said state-owned businesses have received easy access to credit, land use and other important production resources. So have a number of private monopolies, he said.
"The distribution is distorted."
He cited figures from 2010, when businesses in the state sector received more than 38 percent of national investments and contributed 33.7 percent of the GDP and 10 percent of employment, while those in the private sector received 36 percent of all investments, and contributed 47.5 percent of GDP and created 86 percent of jobs.
Thanh said state-owned businesses don't hesitate to borrow large sums of money, and banks lend them a lot of money, as they have some unwritten guarantee.
They will be supported with public funds when they are in trouble, he said.
He described it as "privatizing profits and socializing losses."
Thien also said that Vietnam's government should be more fair and square about the role and benefit of state-owned businesses and the use of the state budget to win the confidence of the public as well as general businesses in the economy.
Vietnam began planning it's path to industrialization in the 1990s, and twenty years on, the economy is still all over the place, experts said during a meeting held by Saigon Tiep Thi newspaper last January.
They said Vietnam's industrial value was already low during the crisis-free period before 2010, and it has been decreasing ever since.
Vietnamese companies rarely use technical innovation and industrial production is more on part with natural resource excavation, they said.
Le Dang Doanh, former head of the Central Institute for Economic Management, said the government has failed to make industrial investments that complement infrastructure or education development.
Doanh said Vietnam's industry has been on a loose foundation ever since the first major modern factories were built in the 1960s in mostly poor rural areas.
He said the economy is weak from bottom to top.
The Ministry of Industry and Trade has not done a good job in keeping up tax barriers to defend local companies from foreign counterparts, he said.
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