Measures to reach 6.7% GDP growth target in 2017

Nguyen Duc Kien, deputy chairman of the National Assembly Economic Commission

Are you satisfied with Vietnam’s economic performance in the first four months of 2017?

Based on the statistics of the General Statistics Office of Vietnam, the GDP increased by only 5.1 percent in the first quarter of 2017, the lowest growth rate since the trough of 5.42 percent in the second quarter of 2014. Thus, to reach the target of 6.7 percent, for the three remaining quarters of 2017, an average of 7.1 per cent growth needs to be produced. This will be difficult to achieve.

Of the three main pillars of the Vietnamese economy, although agriculture, forestry and fishery sectors significantly recovered in the first quarter of 2017, their overall growth rate was a meagre 2.03 percent, a decrease of 1.23 percentage points compared to the same period in 2016. However, agriculture produced 1.38 per cent of growth, a huge improvement over the negative growth of 2.69 percent in the same period of 2016.

Industrial production grew by 3.85 percent, the lowest since 2011. The mining industry decreased by 10 per cent, and construction rose by 6.1 per cent only, which is much lower than the 8.6 percent of the same period in 2016. The only highlight is the services industry, but its growth rate was only 6.52 percent, only slightly higher than in the same period in 2016.

Did the impressive export-import activities during the first four months have no leverage?

In 2016, we expected a trade deficit of 5 percent of the total export turnover, but eventually, we witnessed an export surplus of 1.43 per cent, equivalent to $2.52 billion. However, the first four months of 2017 saw a trade deficit of $2.74 billion, an equivalent of 4.5 percent of the total export turnover. This demonstrates that Vietnam’s foreign trade activity is not stable.

Exports in the first four months of 2017 increased by 15.4 per cent, but this growth rate is difficult to maintain. Donald Trump’s administration is conducting a tax policy with the aim of restricting exports from countries with export surplus into the US. If this policy passes, it will significantly affect the import-export activities, the balance of trade, and many other targets of the Vietnamese economy, as the US is the biggest export market bringing in the largest export surplus for us.

Besides, if the Federal Reserve System (Fed) continues to raise the US interest rate, it will similarly influence the Vietnamese exchange rate, the balance of trade, investment, public debts, overseas remittances, and domestic production and prices.

How did the country fare in terms of attracting foreign investment and establishing new companies in this period?

The total capital licensed for new projects as well as additional capital, and foreign investments under the forms of capital contribution and share purchases during the first four months of 2017 reached $10.598 million, an increase of 40.5 percent compared to the same period last year. However, disbursed foreign direct investment (FDI) only grew by 3.2 percent, to $4.8 billion. Thus we should disburse this foreign investment capital as soon as possible.

During the first four months of this year, there have been 39,580 newly established companies, with a total licensed capital and the additional capital amount of about VND825.3 trillion ($36.3 billion). Nevertheless, these figures indicate that the investment and business environment, as well as the institutional setup, have been improved and raised people’s confidence to do business. However, they do not have an immediate influence on economic growth.

Do you suggest any solutions for this situation?

It is necessary to continue tackling difficulties facing production and business, reviewing long-delayed FDI projects, and avoiding the increase in new investments, while the disbursement is slow. In addition, we should focus on disbursing public investment. As of May 2017, investment capital from the state budget for basic constructions accounted for 18.8 percent of the annual estimate. In addition, the state earned VND50 trillion ($2.2 billion) from the sale of government bonds in 2017, which was not disbursed at all.

In 2016, VND12 trillion ($528 million) gained from selling government bonds was not been disbursed. During the first four months of 2017, only VND5 trillion ($220 million) of this VND12 trillion was disbursed.

I think that we should regularly monitor and tackle difficulties encountered by management agencies to speed up the plan on public capital disbursement, so that this capital reaches the economy, spreads out and contributes to growth.

Tourism is developing beyond our expectations and many calls to position this “non-smoke industry” to spearhead economic development. Do you think this is a workable proposition?

2016 was the first time that Vietnam lured in over 10 million tourists, an increase of 26 per cent on-year. In the first four months of this year, Vietnam welcomed over 4.2 million tourists, an increase of 30 percent compared to the same period last year. With this growth rate, tourism is becoming a significant economic sector of the Vietnamese economy. Nevertheless, to turn tourism into a spearhead, we should largely alter our behaviour and point of view.

For instance, in terms of the economy, tourists taking part in “VND0 tours” (tours that are free but during which tourists are led through expensive shopping venues to make up for the VND0 price) are similar to other tourists in that they are all subject to the same charges. In essence, they have to pay for accommodation, food, and tickets to visit landscapes. If local authorities think that this kind of tour may badly influence the image of the Vietnamese tourism industry, related agencies should closely manage tourism companies which operate these tours, instead of forbidding them. If local authorities maintain their current behaviour, it will be hard for tourism to become a spearhead economic sector.