Credit where credit’s due

The view was shared by government officials and leading experts at an international workshop in Hanoi on January 12.

Achievements and challenges
Former Deputy Prime Minister Vu Khoan said the WTO membership has had both ‘tangible’ and ‘intangible’ impact on Vietnam’s socio-economic development. He said exports increased rapidly in 2007 (21.3 percent) and 2008 (29 percent) but fell dramatically in 2009 to achieve a negative growth rate of 9 percent.

The fall in exports last year was mostly attributed to the downward trend of market prices, while export volume still kept increasing, said Mr Khoan.

Registered foreign direct investment (FDI) hit US$21 billion in 2007 and sky-rocketed to US$71 billion in 2008 before tumbling to US$20 billion due to the adverse effects of the global economic recession.

“The sharp fall of FDI in 2009 wasn’t too serious a problem,” said Prof. Nguyen Mai, chairman of the FDI Business Association.   

He explained that the registered FDI showed foreign investors’ commitments and FDI development trends in a country, not the actual activity of FDI.

Mr Khoan said global integration has had a widespread impact on Vietnam, helping create a high consensus in the public.   

“When joining the ASEAN Free Trade Area (AFTA) in 2005, businesses were deeply concerned about integration,” said Mr Khoan. “But after Vietnam was admitted to the WTO, everything changed for the better – an important factor behind development.”

According to Mr Khoan, Vietnam is better aware of the ‘fragility’ of the market during the integration and crisis periods and it has dealt with it ‘rather successfully’. Businesses have gradually adapted to the adverse effects of integration, and Vietnam has realised its economic drawbacks, he said.

How to overcome drawbacks?
Prof. Mai pointed to the fact that although Vietnam has carried out its institutional reform for many years, its legal documents remain inconsistent.

“This requires the National Assembly to complete the legal system to replace too many decrees and directives which have been issued to implement laws,” said Prof. Mai.

Dr Vo Tri Thanh, deputy head of the Central Institute for Economic Management (CIEM) agreed with Prof Mai, saying reform plays a very important role in facilitating development.

“Reform should be carried out in the institutional and legal systems, the apparatus, and in the way we make decisions to promote transparency in information,” said Dr Thanh.     

He also pointed out Vietnam’s weakness in the services sector and said the country faces a deficit in trade service. He quoted statistics, saying services make up 80 percent of global GDP, while the figure in Vietnam stands at 40 percent.

Orientations toward development
The global economy is predicted to recover in 2010 and Vietnam is no exception. The question is how Vietnamese businesses will seize this golden chance to move forward.

Experts said that in 2009 Vietnam bottomed out from the global economic recession and began to show signs of recovery. Despite a fall in GDP, it was one of the few countries to have achieved a positive growth rate and attracted a considerable amount of foreign investment over the period.

However, former Deputy PM Vu Khoan wondered whether Vietnam could keep pace with the global economic restructuring, which is expected to be undertaken quickly during the post-crisis period. In addition, Vietnam will join other economic institutions with China and Japan, as well as entering into negotiations with the US and Australia.

To stay firm, Mr Khoan said Vietnam should make more accurate forecasts and adopt more flexible policies, as it will have to negotiate with potential markets to sign free trade agreements (FTAs).   

Luong Van Tu, head of the Vietnamese delegation to the WTO admission, said the bottom line is that Vietnam needs to stabilise its macro economy. He cited the instability of the national economy in 2007 and early 2008, saying when the global economy was relatively stable, Vietnam’s credit growth reached a record high of 54 percent. Shortly after that a ‘too tight’ monetary policy was introduced to cool down the market, but this measure badly affected economic growth.