Restructuring needed to save unstable economy

Current instability and bad connection within the economy highly demand it to be restructured, officials said at a Ho Chi Minh City conference Thursday.

A woman shops at a market in HCMC. Continuous high inflation shows that Vietnam's economy is weak and it needs restructuring, officials say (Photo: Phan Hien)

Doctor Tran Dinh Thien, head of Vietnam Academy of Economy which organized the conference, said that restructuring the economy is a demand of reality.

Dr. Thien said the matter comes from two major factors.

One is the economy being caught in different problems that signal some breakdown, and the other is the shortage of elements necessary for integration, which has reduced Vietnam’s competitiveness in world economy.

Vietnam has shown more unbalances in its economic development although it has received more development opportunities since the entrance in the World Trade Organization in 2007, he said.

The economy has caused high inflation and macro instability for a long time.

Continuous high inflation from year to year showed that the current development model is not right and the inner structure of the economy contains a lot of weakness, Thien said.

During the five year period between 2006 and 2010, inflation has surged almost 60 percent while the GDP growth only gained 35.1 percent, according figures reported at the conference.

The officials also argued that most value from the economic growth was earned by rich people, which means the living conditions of average-income earners and poor people have been reduced badly.

A lot of money from state budget has been spent to support the economy every year during the period, but it could only stabilize the economy in short terms.

The return of inflation every year would create a trend for economic breakdown, Thien said.

He said Vietnam’s economy has lost double chances in the past five years. One of them is the chance to make economic boom during the international integration, and the other the chance to restructure the economy amid world crisis.

Scientific professor Nguyen Quang Thai from Vietnam Economic Science Association also shared the opinions.

Prof. Thai said that the country’s economy has experienced big macro instability continuously for the past five years.

He said the economy has cost so much of the country’s money via different price supporting programs and low-interest loans.

Poor organization

Officials at the meeting said that the economic instability can be blamed on its bad organization, which comprises 18 coastal economic zones, nearly 30 border economic zones, 260 industrial zones and around 650 industrial compounds.

That showed the economy has been scattered into many small pieces which are poorly connected to each other, the officials said.

Also, the central government economy is also loosely attached to city/provincial economy, they said.

According to the officials, there is a paradox that the more the economy develops, the more it is divided with harsh competition between localities.

They also warned that Vietnam is depending more on foreign markets, which is presented through increasing trade deficit.

Vietnam’s economy has so far been based on natural resources, cheap labor, strong state-owned businesses but it lacks a strong industrial foundation and a group of businesses which can connect to the world and region’s lines of production.

Dr. Thien said the economy should be restructured first from the macro administration system, including the state budget system, the banking system, public investments and administration reform.

After that should be state-owned economic corporations, economic and industrial zones, and the economic infrastructures.

“There’s a big mass for restructuring,” Dr. Thien said.

By Luong Thien – Translated by Cao Minh

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