New economic priorities for a new year

04:38 PM @ Monday - 01 February, 2021

Despite no signals of an end to the global health crisis, the Vietnamese government is continuing to demonstrate its patience and efforts to drive the economy forward,

with a new target for growth and wider solutions to improve national competiveness and create new space for enterprises to flourish.

The government has enacted on the first day of the new year resolutions with answers to ensure economic growth and spur on development of enterprises.

However, solutions for this year may be a bit different. Inspired by comprehensive economic attainments in 2020 in defiance of the COVID-19 pandemic, the government is looking to a brighter outlook for 2021, with more specific goals to be set (see boxes).

On January 1, Prime Minister Nguyen Xuan Phuc signed and enacted Resolution No.01/NQ-CP on key tasks for implementation of the socioeconomic development plan and state budget estimates for 2021, and Resolution No.02/ND-CP on continuing implementation of measures to improve the domestic business climate and enhance national competitiveness in 2021.

Under Resolution 01, so as to realise the socioeconomic development plan for 2021-2025, the government has identified “solidarity, discipline, innovation, and aspiration for development” as guidelines for action this year.

The government defined 11 key missions and measures, including effective implementation of tasks to serve the organisation of the Party Congress, election of deputies to the National Assembly (NA) and all-level people’s councils, and preparation, issuance, and implementation of action programmes to carry out the resolutions. The government will also continue implementation of tasks in a flexible and effective manner – to simultaneously fight the pandemic and boost economic growth; while completing institutions for the socialist-oriented market economy, thus facilitating economic recovery and development based on stabilising the macro-economy and curbing inflation rate, as well as improving the economy’s resilience.

Meanwhile, under Resolution 02, the government requested ministries, municipal and provincial people’s committees, and other governmental agencies to comprehensively and effectively enforce main tasks and solutions to enhance Vietnam’s business environment and national competitiveness in 2021.

The government ordered priority be given to improving a number of indexes and indicators regarding construction permit issuance, asset registration, settlement of contract disputes, bankruptcy of enterprises, land administrative management quality, application of information technology, quality of vocational training, students’ skills, patent granting, fighting against corruption, online transactions, job opportunities in knowledge-intensive sectors, and a sustainable ecosystem.

Both resolutions 01 and 02 aim to reach the ultimate goals of securing an economic growth rate of at least 6.5 per cent for 2021, with improvements in national economic competitiveness, and in the local investment and business climate.

The resolutions demonstrate the government’s unceasing efforts to drive the economy forward, though last November the NA seemed to take great caution when it set the economic growth target at about 6 per cent only.

Each percentage of growth can create 300,000 direct jobs and many other hundreds of thousands of indirect jobs, according to experts.

Great expectations

Having operated in Vietnam for 25 years, US-backed Cargill welcomes the fresh resolutions, which it believes will help foreign firms like itself to lessen difficulties they have been facing for years.

“For example, the continuation of building advanced and integrated transport infrastructure will not only greatly improve the Vietnamese economy but will attract further investment from US companies especially in the food and agricultural sector,” explained a Cargill representative.

“Further alignment of policies with international standards, expansion of tax investment schemes, and improvements to legal business framework, regulations, and policies will go a long way in making Vietnam an attractive destination for US companies looking to invest.”

Currently, many overseas businesses are facing numerous difficulties when it comes to policies.

According to the American Chamber of Commerce (AmCham), the Vietnamese government has over the past few years promulgated many policies in favour of investors and businesses. For example, AmCham members welcome the announcements of stimulus and support packages applying to a list of industries the government says are greatly impacted such as passenger transport, tourism accommodation, restaurants, and some other fields.

“However, there are some business sectors that were overlooked,” said an AmCham representative. “So we are working with our partners in the government to consider a more comprehensive list of industry sectors eligible for government support.”

The Korea Chamber of Commerce in Vietnam (KorCham) also expected resolutions 01 and 02 to soon come into practice, making it more favourable for the South Korean business community of over 7,000 enterprises to do business. Currently, many KorCham members are facing difficulties in Vietnam.

“I have heard some difficulties of South Korean companies in applying for licenses in Vietnam. Under COVID-19, the government has implemented various favourable policies to support companies to overcome the pandemic’s economic situation,” said KorCham chairman Kim Han Yong. “However, licensing for some large South Korean projects in Hanoi and Ho Chi Minh City have been delayed due to lack of clear legal instructions and this caused many difficulties. So we sincerely hope the government will understand this situation, and clarify guidance of regulations to local authorities.”

There are several things the government can do right now to make Vietnam more attractive for foreign investment. For instance, it is necessary to accelerate the use of e-government, e-commerce, e-banking, fintech, modern cloud computing, and the overall reduction of paper and cash for all businesses to greatly reduce administrative costs and time burdens.

Heading forward

In 2020, Vietnam surprised the world with its impressive control of COVID-19 and its inspiring economic growth rate of 2.91 per cent, making the country one of the world’s top 10 nations with the highest growth, and also one of the 16 most successful emerging economies on the globe in 2020. Last year, the economy’s GDP is estimated to be about VND6.3 quadrillion ($273.9 billion), up by VND263 trillion ($11.43 billion) against 2019, ranking fourth in Southeast Asia, with total export-import turnover of $543.9 billion, up 5.2 per cent on-year – fetching a record trade surplus of $19.1 billion, notably in the context of strong decline in global trade.

The World Bank is expecting Vietnam’s economy will continue to flourish in 2021.

“By all standards, Vietnam has managed the crisis very well. Looking ahead, Vietnam’s prospects appear positive as the economy is projected to grow by about 6.8 per cent in 2021 and, thereafter, stabilise at around 6.5 per cent. This projection assumes that the COVID-19 crisis will be brought gradually under control,” said the World Bank in its economic update for Vietnam released over two weeks ago. The update continued, “Vietnam’s economic resilience is explained by the behaviour of both its domestic economy and its external sector. Not only has the private sector reacted positively to the gradual easing of social distancing and mobility measures, but the government has changed the course of its fiscal policy to support the recovery.”

After three years of fiscal consolidation, the authorities accelerated the disbursement of the public investment programme, which increased 82.8 per cent in 2020 as compared to the initial plan, also the highest rate during 2016-2019.

“Concurrently, like most central banks, the accommodative monetary policy and temporary financial relief measures of the State Bank of Vietnam provides breathing space to affected businesses and people,” said a World Bank expert.

According to the central bank, in 2020, credit institutions restructured debts for 270,000 customers, with total loans of VND355 trillion ($16.9 billion). - VNN-