VINACHEM

VietNamNet Bridge - Economists and experts from leading foreign institutions are optimistic regarding prospects for the Vietnamese economy, saying it will resume its high growth trajectory once it stabilises.

Speaking at a seminar organised by the Indian Chamber of Commerce in Viet Nam (Incham) in HCM City last week, Tuyen Nguyen, investment officer at the International Finance Corporation, said that Viet Nam's social and economic stability was valued by investors.

The Government was committed to stability over growth, he added.

Amit Arora, country head of Standard Chartered Bank's Consumer Banking division in Viet Nam, said inflation was likely to peak later this year.

Meanwhile, the dong was likely to face more depreciatory pressure due to inflation and resultant negative real interest rates, while the continued high interest growth would hamper growth.

The Government's priority shift from growth to inflation control in February and the subsequent tightening of money supply and credit could offset the risks.

"We expect the State Bank of Viet Nam to maintain a tight monetary policy well into 2012 and high interest rates are [also] needed to restore economic balance, including confidence in the dong in the long term."

Inflation during 2011 would not be as high as it was two years ago since food prices were likely to stabilise in the months ahead.

"2011 Inflation will be in line with the average of the past four years."

However, global energy prices were a cause for concern given political uncertainties in the Middle East, a factor in causing inflation in Viet Nam.

Andy Ho, CIO of VinaCapital, said the trade deficit, which averaged US$12 billion to $14 billion annually, remained under control and in fact was an "investment for the future" given that the country imported mostly machinery and equipment rather than gold or automobiles.

Arora expected the trade deficit to be $14 billion, or 11.5 per cent of GDP, the same as last year.

Ho said: "The devaluation of the dong [in February] may be good. Thankfully, operational costs in the country are low."

Arora was "still bullish on Viet Nam in the medium term" given it had the second highest growth rate in Asia in the last decade, abundant resources, a young population, rising consumerism, expanding trade, and political stability.

It is time to invest

"It is a pretty good time to start investing in the stock market," Michel Tosto, director of Institutional Sales and Brokerage at Viet Capital Securities, said.

"The VN-Index had repeatedly rebounded, going down to around 400 points," he explained, noting that such rallies have happened five times in the past.

Now that the index had neared its threshold, it experienced a 5 per cent rise in the last two days.

"Shares in Viet Nam are a lot cheaper than elsewhere in Asia."

The country valuation of 9 is much lower than the 13.5 and 14.4 for China and India respectively.

It means investors would have to pay twice the price to buy shares of similar companies in India.

Trading had jumped to $80 million a day from just $200,000 six years ago.

Internal weaknesses

At another conference held yesterday, experts said if the Government took measures to solve its economy's internal weaknesses to stabilise the macro-economy, inflation would not be a recurring phenomenon.

The country has enjoyed high economic growth rates over the past few years, especially after joining the World Trade Organisation, however, "our economic instability has also increased with the return of inflation every year, according to the Director of the Viet Nam Economics Institute.

The value of dong has decreased by half since 2008, he said.

"International organisations have cautioned that our achievements in eliminating hunger and reducing poverty in the past years may be wiped out because of inflation."

Tran Du Lich, deputy head of the HCM City National Assembly delegation, said the economy was facing many problems, including low quality of growth, high inflation, poor investment efficiency, poor human resources, and low competitiveness.

This is the consequence of policies pursued in previous years when the country paid more attention to the size of economic growth rather than on its quality, he said.

"Our economy rests on three weak pillars: physical infrastructure, human resources and financial infrastructure," he said, adding these factors could not ensure macroeconomic stability.

"We need to restructure our economic mechanisms, investment and financial markets," he said.

Lich advised enterprises to focus on expanding their market shares in the domestic market. The enterprises had been export oriented for many years, and this had loosened their moorings in the local market, he said.

Enterprises at the conference said they had never encountered such a difficult situation as they had this year.

The Government's economic policies had changed many times in the past years, sometimes focusing on controlling inflation and sometimes on stimulating demand, making it difficult for them to make long-term development plans, said Huynh Lam Phat, director of the Thien Phu Loc Company.

The Government should have a long-term policy to stabilise the macro economy in order to retain the trust of people and markets, he said.

Dinh Quang Tung, general director of Tin Thanh Packing Joint Stock Company, said the Government should ensure a level playing ground for both State-owned companies and private companies.

Source: VNS