The Government needs adopt an overall plan to restructure the economy to improve its efficiency and competitiveness in the post-crisis period.
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| Producing shirts for local consumption at Garment 2 Enterprise of the Viet Tien Garment Corporation. Businesses have been advised to strengthen their presence in the domestic market and be less dependent on exports in order to maintain stable production and jobs. (Photo: Saigon Times) |
The crisis and ensuing shrinkage of the world market had badly affected
Corporation. Businesses have been advised to strengthen their presence in the domestic market and be less dependent on exports in order to maintain stable production and jobs. (Photo:
However, owing to the Government’s timely and proper economic stimulus policies, the country has managed to overcome the crisis and gain a GDP growth of 5.32 percent last year.
Despite the recovery, the economy’s growth cannot be seen as sustainable, as it is largely based on extensive use of capital, cheap labor costs, outsourcing goods, and export of raw materials. It has not been based on products with high added-value that are also highly competitive. This reality can be seen in the imbalanced export structure, the high Incremental Capital – Output Rate (ICOR), and the low VA/GO rate (Value-added/Gross output) over the past several years.
Moreover, the country is now trying to maintain growth while trying to prevent a return of inflation and reduce the trade deficit that has weakened the country’s balance of payment.
If the situation cannot be improved soon, it may cause some macro-economic instability. Therefore, we need to coordinate and harmonize, as soon as possible, our fiscal, monetary policy, consumer and foreign trade policies towards stabilizing macro economy this year.
In the recent global financial crisis, many emerging economies have recovered early by effectively tapping into domestic markets to offset a reduction in exports and maintaining business and jobs.
Therefore, the exploitation of domestic markets has yet to be paid due attention in
It is a sound policy, but for it to be successful, businesses will need to rearrange their production structure, build brand names, and enhance product quality, thereby improving the competitive edge of not only of goods for exports, but also of goods for domestic consumption that have to compete with imported products.
To this end, the Government should offer businesses medium and long-term credit to help them expand their domestic market shares, renovate technology and create new products.
Improving competitiveness
The termination of interest subsidy on short-term loans while continuing offering a two percent subsidy for medium and long-term loans for farmers and companies to boost agricultural production or alter their line of business is another sound policy.
To ensure that this policy is effective, the Government should take measures to assist commercial banks in mobilizing medium and long-term capital and improve the liquidity in the stock exchange.
In late 2009, the National Assembly and Government passed important financial and economic policies to support businesses in renovating technologies and production, developing high added value products for export, and seeking new markets.
In the first quarter of 2010, when the global economy enters its post-crisis period, those policies will be stepped up to restructure the economy and enhance businesses’ competitive capability.
Although
In addition, the use of domestic materials in production of goods for export remains at a low level, weakening their competitiveness in terms of production cost.
To sum up, rearranging the export structure, boosting the proportion of local materials used in production, developing hi-tech products, expanding both local and international markets are among the vital factors in ensuring Vietnam’s sustainable development.
By Dr. Tran Du Lich, a member of the National Assembly’s Economics Commitee and the former head of the Ho Chi Minh City Economics Institute
(Source: SGGP)
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