Vietnam announces plan to restructure economy

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Vietnam's government announced  key structural reforms for the economy next year on Thursday , focusing on improving state-owned enterprise and the banking sector.

Prime Minister Nguyen Tan Dung said the government will speed up share sales at state companies and review their operations. State-owned companies will have to focus only on their main business areas, he said.

Speaking at the opening ceremony of the National Assembly's second session this year, Dung said state companies that perform poorly would be restructured and strengthened.

State-owned enterprises will be required to disclose their business results and compete in a fair environment against other sectors, he said.

As for the financial sector, the reforms will reduce the number of weak banks, improve credit quality and develop banking services, Dung said. The government will also help local banks expand so that they are strong enough to compete at the international level, he added.

In the long term, the dependence on commercial banks as financing sources will be eased, allowing the stock and bond markets to supply more capital for the economy, Dung said.

The PM said the government is determined to strengthen the dong and tighten controls over the use of foreign currencies in the country.

Public spending

Vietnam will continue tightening public investment by focusing on urgent projects and refraining from planning new ones, Dung said. Some projects will have to find other funding sources or will be delayed, he added.

According to the National Assembly's finance and state budget committee, even though the government has planned to cut spending under Resolution 11, which was introduced early this year, Vietnam's state budget expenditures have already exceeded the plan for the year by 9.7 percent, or VND70.4 trillion (US$3.36 billion).

"While many key projects and transitional works have not been given capital to be completed and put into use, many new projects that are not really urgent continue to be launched," the committee said in a report, saying the trend showed a lack of commitment to implementing Resolution 11.

A total of 333 new projects using government bond proceeds have been implemented this year, compared to the planned 40 projects, according to the report.

In general there have been no positive changes in the way the government uses its budget this year and the expenditures have failed to support the purpose of restructuring the economy, the committee said.

2012 targets

Phung Quoc Hien, chairman of the finance and budget committee, said most legislators in his committee supported the government's plan to earmark VND180 trillion to development investment in 2012, up 18.4 percent from this year.

The committee also approved a plan to increase the minimum wage to VND1.05 million per month from the current VND830,000.

Vietnam's public debt is expected to stand at 58.4 percent of GDP at the end of 2012, and its external debt will amount to 44.2 percent of GDP, the committee said.

The government said on Thursday it has set the 2012 GDP growth target at between 6 and 6.5 percent. Next year's inflation target will be under 10 percent.

PM Dung said inflation has eased since May. Annual inflation is set to reach around 18 percent this year, he said.

The government managed to bring its budget deficit down to 4.9 percent of GDP from the 5.3 percent target, but some other goals have not been achieved, Dung said.

Vietnam's economy is not stable yet and the banking system has faced liquidity and bad debt problems, he said, adding that both the stock and real estate markets were sinking

The government aims to restore economic stability and secure social welfare next year, as well as consolidating national defense, security and heightening the efficiency of diplomatic work in 2012, Dung said.

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