VINACHEM

The World Bank (WB) has said Vietnam might obtain GDP growth of 7%, instead of 5.6%, this year if the country makes clear what it wants.

The point was raised by Professor David Dapice at Harvard University at a seminar on the world economic outlook and its impact on Vietnam, which was organized in HCMC last Friday by PACE Institute of Management (PACE).

Prof. Dapice, who is an expert in Vietnam and Southeast Asia, said return on investment (ROI) in Vietnam remains low as investment activity is more influenced by political factors than economic efficiency.

The Government often pours a lot of money into infrastructure projects in provinces without caring much about economic efficiency, he noted, adding much capital could not go to the right place, making its use inefficient.

Politically influenced decisions may make certain groups of people pleased but negatively impact on economic growth.

In terms of ROI, Prof. Dapice cited the figures of the World Economic Forum 2014 saying Vietnam’s State budget for infrastructure development accounted for 12% of gross domestic product (GDP) but it scored a mere 3.5 on a scale of 1 to 7 while Indonesia’s respective figures were 7% and 4.5.

When Vietnam joined the World Trade Organization (WTO) in 2007, a group of experts including Prof. Dapice advised the Government to refrain from interfering in the market but this advice had not been taken seriously.

As for China, upon its accession to the WTO, it allowed foreign-invested businesses to invest heavily into a number of sectors, thus forcing local firms to enhance their competitiveness.

State-owned and private businesses are not operating in a level playing field and this is why a number of private firms have resorted to connections with officials to do business, said Prof. Dapice. Such a business practice should be eliminated to create fairness, he added.

Prof. Dapice warned Vietnam should not be pleased with the pace of FDI increase because regionwide the nation’s growth rate has declined over the years.

In 2008, Vietnam attracted 20% of total FDI in Southeast Asia but the percentage dropped to 7% in 2013. The fall is attributed to the serious lack of supporting industries in Vietnam.

Regarding the ASEAN Economic Community (AEC), Vietnam will enjoy a number of advantages for development. The country is likely to woo more investors thanks to its cheaper labor than Thailand and Malaysia.