At the international conference “State roles and functions in market economy model: Some implications of institutional framework reform in Vietnam” held recently in Hanoi, national and international experts recommended that improved opportunities for the private economic sector will bring sustainable development to the Vietnamese economy.
According to Dr Le Dang Doanh, after a decade of rapid growth mainly driven by State-run economic groups and corporations, the Vietnamese economy has entered a very difficult period characterised by high inflation, ineffective public investment and State-owned enterprises (SOEs), bad debts, weaknesses of the banking system, real estate balloon that slows down economic growth, environmental destruction, and potential risk of falling into “middle income trap” even when per capita income is very low at present. While Vietnam takes the State economy as the “fist of steel” and “macro-economic stabiliser”, the reality shows that the inefficiency, waste and operating loss of State-run economic groups have cased ineffective huge investments and reduced competitiveness of Vietnamese economy. So, more than ever, Vietnam is required to change economic thinking, shift growth paradigm and take far-reaching reform to sustain growth and development.
Professor Raulph Michael Wrobel from West Saxon University (Germany) said when the rules of economic games are defined, the state of Vietnam should not play itself the games but act as a ‘judge’ of competition.
The current economic growth model is characteristically based on extensive growth driven by investment and natural resource exploitation with the same direction of industrialisation for all 63 provinces and cities without taking into account specific local conditions. The provinces and cities scramble to accelerate industrialisation and build their economies with similar infrastructure facilities like seaports, airports and industrial zones.
Dr Le Dang Doanh said administrative decentralisation and central – local relationship currently lack coordination and consistency – must-have requirements of a national economy. Therefore, while economic thinking cannot be changed, growth paradigm cannot be shifted and far-reaching institutional reform cannot be performed, it needs to strengthen regional connectivity to deal with scattered investment over the past time while connect current airports, seaports and industrial parks to offer diverse services supply chains.
Besides, the main measure of economic activity in Vietnam is GDP growth while making light of increasing labour productivity, efficiency and competitiveness, let alone environmental protection obligation. These shortages cause resource wastage and inefficient investment. To change growth model, Vietnam needs to give up current growth targets and shift to a set of socioeconomic indicators which underscores efficiency indicators such as the improvement of energy and resource uses, he said.
To attain sustainable development, experts recommend policy changes to reduce benefits from natural resource exploitation and real estate speculation. In addition, Vietnam needs to clearly define powers and responsibilities of ownership regime, individual responsibilities for investment decisions, and the use efficiency of State capital, land and natural resources. It also necessarily ends privileges and preferences concerning land, natural resources, land tax, and natural resource tax for State-owned enterprises. It needs to encourage public-private partnership in public investments.
Professor Wrobel also recommended that the market of Vietnam and opportunities for businesses, especially the private sector, need to be improved. Besides, Vietnam needs to form venture capital funds, encourage investment in science and technology, and improve added value, efficiency and competitiveness. Above all, the country must enhance the social security system as well as the education system so that it can achieve higher ranking and soon become an industrialised nation.
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