Fulbright expert warns of return to old growth model
Fulbright expert warns of return to old growth model
VietNamNet Bridge – Vietnam is likely to come back to the growth model fueled by the State sector rather than private enterprises in the coming years if strong investments from the former continue.
Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program (FETP), gave the warning at a seminar on Vietnam’s economic outlook in 2015 in HCMC last week.
Stronger investment growth of the State sector than that of other sectors helped the Government achieve economic stability and prop up economic growth, Thanh noted. The investment growth of the State sector was low in the previous years when public investments were restructured and tightened.
However, things were quite different last year when investments of the State sector bounced back, especially investments sourced from State credits and loans jumping 34.1% last year over 2013. Meanwhile, investments of the foreign direct investment (FDI) sector, the private sector and government bonds grew 10.5%, 13.6% and 11.4% respectively, Thanh said, citing statistics of the General Statistics Office.
Investments by the State-owned enterprises’ own capital also picked up 21.7% in 2014 against the previous year.
“… if this trend continues, this year or next Vietnam would return to the old growth model that is led by the State sector. The country has not made full use of private enterprises,” Thanh said.
Commenting on this year’s economic outlook, Thanh said the local economy would fare better given the loosened monetary and fiscal policies, faster restructuring of State enterprises, Vietnam expected to sign some important trade agreements, the effect of the revised laws on investment and enterprises, and implementation of a program to improve the nation’s competitiveness.
“The economy will be better this year than last year,” Thanh said but noted that there have not been considerable changes to Vietnam’s growth model.
When talking about Vietnam’s economy earlier this year, Vuong Dinh Hue, head of the Party Central Committee’s Economic Commission, pointed out a number of challenges in the economy.
For instance, the country’s economic growth has not been sustainable due to several woes, including budget deficit. Reasonably, 50% of the budget should be for routine spending, 25-30% for development investments and 15-20% for debt payments. However, routine spending now makes up 68% of total State expenditures.
Last year, some 30% of the operational enterprises pay corporate income tax, suggesting that enterprises are still grappling with hardship.
