Restructured state sector, TPP to push economic growth in 2014

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A ship is repaired at the state-owned Ha Long Shipbuilding Plant in Quang Ninh Province

Vu Xuan Thuyen, a senior official and economist of the Ministry of Planning and Investment's Department of Enterprise Development, tells Vietweek that economic growth will be higher this year than in 2013 because the government has expedited reforms and will sign the Trans-Pacific Partnership Agreement to boost exports.

How do you assess companies' businesses performance in 2013?

Vu Xuan Thuyen: In a recent government meeting, Prime Minister Nguyen Tan Dung affirmed that enterprises improved their business results in the last half of 2013. Some 76,000 enterprises were established last year, while others that had to temporarily cease operations amid the economic slowdown have recovered in terms of production and business. 

Many firms have sought new export markets, resulting in good export growth. Some firms have implemented restructuring plans at the prime minister's request.

However, difficulties still exist. Despite lower interest rates, many firms have not been interested in borrowing more capital as they still find it hard to expand production and business. Some enterprises have even had to fire workers.

Companies are expected to face more difficulties when Vietnam joins the common ASEAN economic community in 2015. Amid the fierce competition, they will have to improve their technology, workers' skills and seek more markets. This is an urgent requirement for Vietnamese companies in the context of international integration.

What do you think about the restructuring of state-owned enterprises? Is this an important factor for the economy?

State-owned enterprises (SOEs) have strictly implemented the prime minister's requirements on economic restructuring. They are determined to withdraw investment from non-core sectors. However, they have still faced difficulties in doing so due to a regulation that requires them not to sell their stake at lower prices than their original value. 

The government has recently allowed SOEs to sell their stakes at a loss to accelerate the divestment process. However, they can't do it until instruction circular of the Ministry of Finance is issued. I think the disinvestment will be more quickly implemented after the circular is issued.

 
VU XUAN THUYEN, Department of Enterprise Development

We have to accept that SOEs with prolonged losses will go into bankruptcy. At that time, many laborers will lose jobs

Minister of Planning and Investment Bui Quang Vinh has recently said there will not be any priority given to firms in implementing the issue. All SOEs will have to complete the disinvestment from non-core sectors by 2015.

But the stockpiles of properties and bad debts still stand high?

The reduction of property stockpiles is still slow. Property firms should consider cutting their selling prices to boost sales because the prices are still too high. The disbursement of the government's subsidized package of VND30 trillion ($1.43 billion) to the property market has moved too slow. To date, less than VND1 trillion from the package has been disbursed. The market has seen initial positive signs but difficulties are expected to continue in the coming time.

There is an opinion that we should increase public investment to boost economic growth. Could increased public investment benefit us as we restructure the economy?

We still need investment for economic development, but we should more carefully consider investment projects. Meanwhile, economic restructuring should be implemented under a plan.

The government has decided to issue more bonds next year to have capital for important infrastructure projects. Obviously, we need investment to ensure economic growth in the future.

However, it is necessary to tighten public investment.

We have to pay a price in short term for successful restructuring. What is the price?

We have to accept that SOEs with prolonged losses will go into bankruptcy. At that time, many laborers will lose jobs.

There is an opinion that Vietnam, to successfully restructure the economy, may have to change its political institutions. What do you think about the issue?

I don't think that everything will be better if the political institution changes. According to our new constitution, SOEs hold the key role in the economy, and the Party holds the leadership role.

The issue is that the government has to take measures to create jobs for laborers, ensure a society of democracy and civilization and good social welfare. The change in political institution will not help economic reforms at least in the transition period of 15 years from now.

Despite difficulties, some firms have performed well. What are business lessons withdrawn from such cases?

Firms have to improve their machines and equipment and increase labor productivity to increase their competitiveness. If they don't do so, companies will be defeated by foreign rivals
even in the domestic market, especially when Vietnam joins the common ASEAN economic community in 2015.

Can the economy recover this year? Which sectors have the best prospects?

The National Assembly has set a target GDP growth of 5.8 percent in 2014, but the government said it will try to push economic growth to 6 percent, much higher than the 5.4 percent recorded last year. The government has issued important policies to restructure SOEs and facilitate the development of private firms.

This year, Vietnam is expected to sign the Trans-Pacific Partnership Agreement, which will help boost our exports. Export sectors in which Vietnam has advantages- like electronic and agricultural products - will benefit the most.

What are the weaknesses in economic management that should be solved to boost economic recovery in 2014 and the following years?

The government needs to keep the economy stable, prevent inflation hikes, and increase production and business to create more jobs for laborers. The restructure of SOEs should be completed by 2015.

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