Experts say it’s high time to address economic restructuring

VnnNews – Vietnam’s present growth model has reached the peak of its potential, said some analysts. They say that economic restructuring is essential to avoid a perverse outcome.

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A recent article in the influential weekly Tuan Vietnam reports the views of several economic strategists who argue that only radical restructuring can sustain growth and armor Vietnam against further crises.

Growing but getting poorer?

Echoing Professor Michael Porter, a leading expert on competition theory, these scholars say  Vietnam’s economic growth model has reached its peak.  They emphasize that restructuring is the key to Vietnam’s escape from ‘traps of unsustainable growth.’

Leading the charge is the vice director of the Central Institute for Economic Management (CIEM), Dr. Nguyen Dinh Cung. “The current thinking and model of growth are no longer suitable.  We cannot follow a growth theory that focuses on quantity, magnifies and adores statistics and covers defects of the economy. Otherwise, the more we grow, the poorer Vietnam really is”.

Dr. Tran Du Lich, an influential member of the National Assembly’s Economic Committee, says that the current crisis has showed off all the weak points in Vietnam’s current growth model.

“The more we boost quick growth based on the expansion of capital, low added value and the overexploitation of cheap labor, we’ll become less and less competitive,” Lich analysed.

“This is the right time for Vietnam to restructure its economy, otherwise the economy will be sluggish.  The country will enter a period of ‘impoverishing growth”, said Dr. Phan Dang Tuat from the Institute for Industrial Strategy and Policy.

Lich said that the most important thing now is “major surgery” on the economy, not relying only on “first aid” (temporary measures).

The National Assembly’s senior expert, Dr. Dang Van Thanh, emphasized that Vietnam needs to re-allocate its resources and prepare for the post-crisis period.

Thanh said that though impacts of the Asian financial crisis in 1997 were minor on Vietnam, the country took 4-5 years to resume growth. Meanwhile, South Korea suffered heavily from the crisis but took advantage to restructure its economy and resume a high rate of growth by 1999.

What should Vietnam do?

Thanh says that Vietnam should restructure its institution and economy.  Dr. Tran Du Lich agrees, pointing out that reforms must address each economic sector.

Secondly, says Thanh, Vietnam needs to restructure the relationship between the local and international market.  An economic strategy that concentrates on increasing exports while replacing imports is inappropriate.

Thirdly, Vietnam should restructure its investment model.  At present, a dollar of new investment results in an unacceptably low increment of production.  In particular, the nation needs to simplify procedures related to capital construction.

Fourthly, the country needs to restructure the system of enterprises. The market should be allowed to filter out unhealthy enterprises.  The state may assist enterprises but ought not subsidize them.

Finally, Vietnam ought to restructure its economic institutions.

Thanh suggested using four groups of macro regulating tools: fiscal policies, monetary policies, spending policies and foreign trade policies to influence the market and then enterprises.

Dr. Tran Du Lich says that policies must support strategies.  In a market-based economy, economic structure is adjusted based on policies. “The state can’t asked farmers to plant these trees or enterprises to produce these products. These outcomes must result from appropriate policies,” Lich said.

CIEM’s Nguyen Dinh Cung calls Vietnam’s policy and legal making process ‘outdated,” and unable to ensure good policies and laws.

Dr. Phan Dang Tuat said that thirteen ministries share responsibility for the industrial sector.  “It is balkanized,” he said, and strategic coordination is next to impossible.  For example, the Ministry of Construction manages cement production while the Ministry of Transport is in charge of automobile, train and ship building.   “If our industrial structure is not changed, management problems will never be solved,” he said.

Hoang Phuong

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