Chances missed as VN economy slowly restructures

Chances missed as VN economy slowly restructures

Vietnam has failed to grab many chances for development thanks to its slow economic restructuring, according to the 2013 Vietnam Economy Report, released on Monday.

“The Vietnamese economy is like a heavily loaded cargo truck slowly traveling on a tough road into the future,” the report, compiled by the Vietnam Centre for Economic and Policy Research (VEPR), Hanoi University of Economics, and the University of National Economy, says.

Six years after joining the World Trade Organization, the country’s growth dipped to an average of 5.8 percent a year, compared to 7.8 percent a year prior to the WTO participation, said VEPR director Dr. Nguyen Duc Thanh.

On the other hand, Thanh added, Vietnam’s average inflation in the post-WTO period rose to 11.5 percent, while earlier the figure was only 7.35 percent.

“The country’s economic reforms have not been implemented in a strong and determined way as society expected,” he said.

For a general evaluation of the Vietnamese economy in 2012, the report asserts that the government “has been hesitant in releasing its policies, sending the economy into a sluggish state.”

“Both investment and consumption were on a decline, but the government still did not figure out any basic policies at the end of the year,” the report reads.

The weakened business environment, plus the exorbitant lending interest rates, has sent more than 50,000 businesses out of the market.

2013 forecast

As for the forecast for the economy in 2013, the VEPR report points out two scenarios.

In the first scenario, if the government remains cautious in stabilizing the macro-economy and adjusting prices, GDP growth is projected to be only 5.04 percent, while inflation is 4.95 percent.

Meanwhile, under the second scenario, if the government loosens management, GDP is predicted to rise 5.35 percent, and inflation, 6.64 percent.

The report also warns against China’s increasing purchases of natural resources from developing countries, including Vietnam.

“Chinese purchases sent prices to higher rates, so countries rich in natural resources tend to focus on selling raw materials rather than boosting their processing industry to enjoy higher added value,” the report reads.

Dr. Le Dang Doanh, former head of the Central Institute for Economic Management, said he holds the VEPR report in high regard.

“The report’s figures prove that Vietnam mostly exports raw materials to China and thus gains poor added values,” he said.

“This is a real threat, as the country’s industry will fail to compete with other nations, and will even weaken gradually,” he warned.

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