What is the motivation for the economic growth?

Private investment prospects is one of motivations for the economic growth in 2017. Picture: H.Anh.

Slow growth

In the first quarter in 2017, the GDP growth of Vietnam was impacted by the slowdown in the world trade and investment, the fluctuations in financial and currency markets and the changes in the international policies of big countries. In the domestic, beside the outstanding achievements on improving business environment and business development in 2016 and positive signs of the exports, attracting foreign visitors and foreign investment in the first months in 2017, several remanining problems such as growth quality, labor productivity and low competitiveness are still challenging our economic growth target. In the first quarter in 2017, the DGP growth was only at 5.1% compared to 2016, the lowest point over past 3 years. The reason came to the decrease in the agricultural and mining industries – the key sectors of the economy.

Previously, since the beginning of 2017, the National Assembly has approved the plan, target for economic development in 2017, accordingly, the GDP growth target was set up at 6.7%. From the statrting point of the economy in the first quarter in 2017, experts, foreign and domestic organizations think that the economy in 2017 is hard to reach the target as expectation due to the public debt pressure, the impact of the FED’s interest rate increase and the slow economic reform… About the GDP growth in 2017, the National center for Socio-economic information and forecast has provide a baseline scenario, in which the GDP growth will be at 5.6% in the second quarter, 6.4% in the third quarter and 7.1% in the fourth quarter. Accordingly, the GDP growth in the entire 2017 may reach 6.2% and the inflation will be at 4.7%.

Speaking about the motivation to reach the higher growth rate in the coming quarter, contributing to increase the GDP of the entire year, Dr. Dang Duc Anh, Head of the Centre’s Analysis and forecast department of the National Centre for Socio-Economic Information and Forecast thinks that, the enterprises’s trust in the business environment has been more stable, more than 50% of enterprises said in the second quarter, they had more orders than the first quarter. In the second quarter, the investment in the private area and FDI area will be brighter with the effort and determination of the Government in improving the business environment.

Be more optimistic, the Asian Development Bank (ADB) thinks that, the GDP growth of Vietnam will reach 6.5% in 2017 and 6.7% in 2018. The motivation for the breakthrough, according to the ADB, comes from the strong growth in the industry and services, forescasted to be mantained, the slight increase in agricutural and mining quantity is also contributing to the economic growth.

6.7% is not imposible.

Recently, in the meeting with ministeries, branches, organizations, enterprises to discuss about the solution to remove difficulties, promote the economic growth, Deputy Prime Minister Trinh Dinh Dung has reuqired branches at various levels, enterprises on all areas to focus on reviewing targets, finding out causes, removing difficulties, pushing the economic growth to reach 6.7% in 2017. In order to achieve this goal, according to the Deputy Prime Minister, it should be implemented in a synchoronous manner, but the most important thing is the efforts of each sector, area, and enterprise. Thus, the Government has showed clearly its determination to reach the growth target set up.

On the problem of whether to try to pursue the GDP growth target of 6.7% in 2017 or not, Dr. Nguyen Duc Thanh, Director of the Vietnam Institute for Economic and Plicy Research (VEPR) says that we can try, but we should try under the direction of focussing on improving quality rather than quantity by some measures such as increasing curide oil exploitation… Through quality improvement, it may made the economic growth slower but it will be more stable and this is important thing. He also emphasizes, in order to improve the econimic growth, the most important thing is to strengthen the development of the domestic production sector, to make domestic enterprises more confident and have more opportunities to develop in the current business environment.

Having positive view, the economist Nguyen Minh Phong says that trying to reach the GDP growth target of 6.7% in 2017 is not an impossible task. However, according to the expert, it is important to maintain a high enough growth rate but it still have to ensure macro stability and fight against inflation, and the growth rate of 6.5 or 6.3% is quite good, as long as the development must be sustainable. If we take measures to make the private sector grow up to reach 6.7% , that is too good.

According to experts, investment prospects are brighter as business practice reforms have helped Vietnam improve its position in the World Bank's Business Environment ranking from 91/189 countries surveyed in 2016 to 82/190 countries surveyed in 2017. By allowing foreign investors to own more shares in equitized SOEs and allowing private investors to participate in the infrastructure construction projects, it will motivate private investment. According to the General Statistics Office (GSO), the total social investment for the first quarter of 2017 at current prices was estimated to reach 297.8 trillion vnd, increased by over 8% compared to the the last year. In particula, the state sector achieved 117.4 trillion vnd, accounting for 39.4%, the highest among the three sectors (the state capital, FDI and private investment). Thus, the private investment is the strongest increase, this is a good signal as the FDI continues to increase.

The biggest waste now is time.

Another view, Proff. Nguyen Mai says, some countries and territories such as South Korea, Singapore, Taiwan, Hongkong… have had the economic growth of 9-10% for 20 years, or China from 2001-2014 had had the economic growth of 12%/year. Thus, he confirms the economic growth rate of over 6% is not high and to catch up with other countries, the growth rate is not the level that can meet the demand to overcome the lag compared to the world.

Quotes from a Japanese book, he says our biggest waste now is time. For example, a road that could have been completed within one year would make Vietnam waste two years, the Law on supporting small and medium-sized enterprises built in two years, passed by the National Assembly and until the law impacted to the company, it lost a total 3 years, if it is a weak business waiting 3 years, it also “died” before "touch" into the law. These delays cost a lot of money. He also affirmed, the growth potential is very much, as long as we are against waste of time, the growth is even higher now.

"Moreover, it is important to emphasize that the size of Vietnam's economy is small, if we increase by 1% GDP, it will only increase by $US 2 billion, not so much compared to the world, so we should not focus on the increase of the growth rate, we should focus on exploiting the potential, especially saving and fighting against waste of time in all activivities. Factories, roads, airports, docks should be put into use earlier with a better transport acceleration, the growth will be surely higher. In addition, how to make the best connection among the FDI enterprises and businesses in the country, become the mutually beneficial partners, support each other in the global value chain as Samsung is doing, or the model of the Vingroup Group in the hi-tech agriculture, clean farming with the affiliation of hundreds of cooperatives, distributors... If there are such spreading organizations, an increase of a few percent in growth rate is not something out of reach", Proff. Nguyen Mai said.