The restructuring programme, focusing on three areas including the banking sector, public investment and State-owned enterprises (SOEs), saw initial results; positive signs that the economy will continue to stabilise and grow at a faster pace in 2014.
In 2013, the Party and State’s flexible monetary and fiscal policies helped stabilise the macroeconomy, brought inflation under control and ensured social security.
The Government also began altering the economy by approving three restructuring projects for public investment, the banking sector and SOEs.
Regarding the banking system, although there were still many questions over the process of handling bad debt and enterprises’ access to cheap loans, 2013 saw many notable results. Inflation was controlled and the forex and gold markets stabilised. The State Bank of Vietnam was successful in restructuring nine weak banks and the banking system weathered its most difficult period. Interest rates fell from 16% to 10% at the end of the year, which is expected to drive broader economic recovery.
On public investment, the Prime Minister issued decrees for the streamlining of the management and use of the State budget as well as Government bonds in public investment projects in order to curb inflation. The most important milestone was a directive that switches plans for public investment projects from a yearly basis to a medium-term basis. This is a measure aimed to increase transparency and tackle corruption. The Government also approved a 2-year plan for public investment projects of Government ministries, agencies and localities.
Regarding SOE restructuring, the Government ordered ministries, agencies and People’s Committees of centrally run cities and provinces to properly implement measures to re-organise SOEs and enhance corporate management capacity. At an online conference with localities on implementing the resolution on socio-economic development in 2014, the Prime Minister stated that leaders of enterprises which refuse to be equitised will be dismissed. This is an aggressive move by Government to expedite the progress of SOE restructuring.
Amidst a State budget deficit, the total capital for public investment approved by the National Assembly and Government remained at no less than 25%. For 2014, Vietnam has an additional VND15 trillion (US$705 million) from issuing Government bonds to be used as counterpart funds for ODA projects. This is a huge source of capital that has not been effectively tapped in the past.
Recent forecasts show that the world economy will recover and post stronger growth in 2014. The International Monetary Fund (IMF) predicted a 3.5% growth rate for the global economy for 2014. China will continue to maintain high growth while the US economy is showing signs of recovery. The Eurozone is overcoming the public debt crisis step by step with some economies in the area regaining growth and the Asia-Pacific is also expected to sustain momentum. In 2014, foreign investment, particularly from the US, Japan and the EU, is expected to increase with a concentration in the Asia-Pacific region.
The Vietnamese economy will benefit from global recovery. Vietnam is also anticipating new impetus from the Trans-Pacific Partnership. The economy needs to increase the pace of regional economic integration over the next two years as the ASEAN is slated for a common market in 2015.
Over the next year and beyond, the Government will pay attention to the production of all economic sectors, especially enterprises operating in the agricultural sector. Additionally, a well-balanced combination of monetary and fiscal policies is needed to contain inflation and promote growth. Effective administrative reform is also an essential task in the coming time, with activities to improve the capacity of civil servants to be planned, whilst establishing mechanisms to properly address the relationship between the State and the market so that the people’s consent and confidence can be strengthened.