Root cause of instability yet to be addressed: experts

Experts at a seminar in HCM City on Friday voiced grave concerns over the country’s macro-economic uncertainty, pointing out that the root cause of the current instability has not yet been addressed.
High inflation and low business efficiency remain the biggest challenges facing the economy in the rest of the year and into the following year, said Tran Dinh Thien, head of the Vietnam Economic Research Institute.

“The year 2011 has seen both the inflation and the ICOR (Incremental Capital Output Ratio) reach the unprecedented levels,” Thien was quoted as saying by local media at the seminar Vietnam’s Economy 2011 – Prospects for 2012 and Solutions for Socio-Economic Plan 2011-2015.

The seminar was jointly organised by the National Assembly’s Economic Committee and the Vietnam Social Sciences Institute.

Le Dang Doanh, a high-profile economist, told the seminar that the public confidence – both at home and abroad – in the local economy has been seriously dented due to prolonged problems.

“All macro-economic indicators such as inflation, budget deficit, trade deficit, international payment balance, foreign debts and public debts, and the foreign exchange rate have (risen to a level) that have adversely affected the confidence of local people as well as local and international investors,” Doanh said.

“No doubt our country’s socioeconomic situation is in the worst circumstance since 1991,” Doanh stressed.

Several economists pinpointed the State sector’s poor performance as the root cause, saying bitter pills should be prescribed for restoring economic stability.

Thien of the Vietnam Economic Research Institute said that the economy needed radical restructuring if stability is to be achieved.

“(We) cannot fight inflation, restore macro stability and establish a modern foundation for growth if we do not change the system of resources allocation,” he said, hinting at the way State-owned enterprises are receiving privileges despite their prolonged losses.

He noted that big State-owned corporations were incurring huge losses this year, including Electricity of Vietnam losing some 11.67 trillion dong, Petrolimex some 1.2 trillion dong, and Vinashin nearly 3.1 trillion dong.

Despite such losses, the State sector still invested some 22.5 trillion dong outside their core business areas.

Tran Du Lich, a member of the National Assembly’s Economic Committee, said that the country next year should find more efficient ways to contain inflation at a singledigit rate rather than targeting high economic growth.

He said certain laws need to be amended to promote economic restructuring.

Figures from the General Statistical Office show the country’s inflation in September rises 0.82 percent month-on-month, taking the number to 16.63 percent compared to end-2010.

However, some experts at the seminar said the galloping rate might return in the absence of efficient measures.

Pham Do Chi, an expert at the Star Plus programme, said inflation by the end of this year should hover around 19-20 percent given the current policies, but if money supply should increase starkly as feared, the rate may surge to 24 percent, according to Vn- Express.

Saigon Time Daily

Tags: Vietnam economic, Vietnam economic growth, Vietnam economy, Vietnam economy 2011