Vietnam should pay top attention to infrastructure development: economists

Although Vietnam has become a middle-income country, it has not yet given pace to the development of infrastructure. The government’s plan on just choosing an industry and making investment in it in the long run could be wrong.

According to Changyoung Rhee, chief economist of Asian Development Bank, Vietnam should pay attention to infrastructure quality, quality of investment in this area. For this, the government need to attract private capital to join, so-called public-private-partnership model (PPP). It can be seen as a challenge of Vietnam.

Making comments on this issue, Wang Tao, chief economist of investment bank UBS AG said, China’s experience is that the government should promote public-private partnership first, then the private sector realises this model and join in.

Earlier, while attending a summit on business in Vietnam May 3, Vietnamese deputy prime minister Hoang Trung Hai also announced a capital investment needed for Vietnam to develop in 2011 – 2015 period is approximately $300 billion.

While the economist of ADB to Vietnam focused on ‘hard’ infrastructure (roads, bridges, ports…), the representative of Standard Chartered Bank again emphasized the ‘soft’ infrastructure.

Gerard Lyons, chief economist, head of economic research group at Standard Chartered Global paid special attention to issues of labour skills in Vietnam and “good governance” by the government.
Lyons said that the world knows about Vietnam having a team of child labour, hard working labour, but still low cost, lack of skills. If looking at the neighbouring country-China, it can be seen that it is being absorbed for capital by investors and international companies with skilled workers. Therefore, Vietnam should focus its competition in this field.

The lesson for Vietnam is it should make its policies in line with domestic demand and avoid loosening monetary policy, said Lyons.

He said Vietnam’s economy is facing risks, “retrogression” in growth, and policy should be tightened to control the speed of ‘hot’ economic growth and control inflation. This would mean Vietnam needs to have higher interest rates, reduce credit growth, the wise macroeconomic measures to control the property sector.

Sharing with this opinion, Professor Kenichi Ohno, economist from Japan, who has over ten years of researching on Vietnam, warned that Vietnam should pay attention to the large capital flows from outside into the country. With a small economy like Vietnam, the large flow of ODA, FDI, and remittances will easily create a boom in real estate markets, stocks market and others. Therefore, the government should have medium-term measures to control the flow capital for “adequate” absorption.

According to Lyons, in the long term, if Vietnam is to rely on exports as the engine of growth, the opening of the economy will make Vietnam become more vulnerable, external shocks and have to undergo unstable growth. – SGTT

Tags: Vietnam Infrastructure