The head of the Vietnam Institute of Economics believes that 2017 will be a tougher year for the country’s economy, thus listing several priorities that need addressing so the government can meet its GDP growth target.

In a Lunar New Year interview with Tuoi Tre (Youth) newspaper, Dr. Tran Dinh Thien asserted that the challenges awaiting the Vietnamese economy in 2017 are huge, if not much bigger than in 2016.

“Consequently, besides the priority of creating favorable conditions for enterprises and businesspeople, the government should also focus on achieving actual, rather than nominal, economic growth,” Thien said.

Challenges linger

Vietnam's economy expanded 6.21 percent in 2016, lagging behind the 2015 growth of 6.68 percent and the government's target of 6.7 percent, according to the General Statistics Office.

Despite the first economic slowdown in four years, the government still set a GDP growth target for 2017 at 6.7 percent.

Asked if this is an achievable goal, Dr. Thien said it “indicates the government’s aspiration and was set based on recent efforts and results in the government’s bid to restore trust from the public and the business community.”

“But to me, whether the real economic growth in 2017 is 6.3 percent or 6.7 percent is not as important as if the government could fully focus on other ‘life-and-death’ issues,” he said, elaborating that those crucial tasks are restructuring the economy and changing the growth model.

Dr. Tran Dinh Thien, head of the Vietnam Institute of Economics.

Dr. Thien added the current ‘constructive government’ and its recent policies to facilitate the business sector are positive signs for the economy in 2017, even though “the bigger picture is still full of challenges.”

The ‘constructive government,’ as pledged by Prime Minister Nguyen Xuan Phuc when taking office in July 2016, is one committed to creating positive conditions for enterprises and startups.

“The premier and his government have indeed taken action to fulfill their commitments in recent times, which has restored trust from the public and the business community,” Thien remarked.

“However, as the prime minister has repeatedly said, the longest path in Vietnam is one from words to actions, things cannot just change overnight.

“We have to overcome several other hurdles, the toughest of which are constitutional, mechanism and cultural obstacles.”

The Vietnam Institute of Economics head asserted that the country’s economy remains weak, which “prefers imports and assembling for immediate use, instead of developing the domestic manufacturing sector.”

Thien said the government has acknowledged the ‘chronic diseases’ of the economy but “it is a long-term race for our economy to recover from these ‘diseases’ to be able to enter a high-speed race for stronger growth.”

Things need doing

To address these challenges, Thien suggested three core tasks that need to be done immediately.

“First, we have to review public spending – we used to mobilize a lot for the state coffers, only to spend too generously and wastefully on costly projects that are never commissioned,” he said.

“We should focus on reducing public spending – fixing the way money is spent, instead of collecting money from all possible sources when the budget is tight.”

The second priority, according to the pundit, is to “really resolve the bad debt issue in the banking sector.”

“Resolving bad debts will help businesses overcome their own challenges easier,” he explained.

The last thing, Thien said, is to change the mindset of developing the business community.

The government has plans to have more than one million businesses in Vietnam by 2020, but the expert said quality prevails over quantity.

“Last year we had more than 110,000 new enterprises, but at the same time, up to 80,000 businesses were shut down,” he said.

“What matters is creating an environment newly-formed businesses can operate and thrive, instead of trying to have as many businesses as possible.

“The new businesses must be the strong, rather than the small that fail to prosper following establishment.”

Besides these three top issues, Dr. Thien said the government should also create a fair market for private and public enterprises to compete with each other.

“The government should also concentrate on such cities with strong economic growth as Ho Chi Minh City, Hai Phong and Quang Ninh, and change the growth model,” he added.

“Vietnam’s economy should not rely only on cement and steel production, parts assembling and using natural resources.”

Like us on Facebook or follow us on Twitter to get the latest news about Vietnam!