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Economic

Some Directions on Restructuring the Economy in 2012 – Vietnam

(CPV) – Entering into the 2012 plan, Vietnam has fundamental advantages. However, Vietnam’s economy in the near future has to face many difficulties and challenges because of unstable macroeconomy, high inflation and interest rates, which have negative impacts on production and life of the people. Natural disaster, floods, epidemics are complex and unpredictable factors in the upcoming period.

Additionally, it is forecasted that the world economy in 2012 will continue being even more complicated. Many factors adversely affect the recovery. The world economy could fall into another new recession. Budget deficit and excessive high public debt put pressure on developed countries, such as the EU, the US and Japan, threatening the stability of the world economy. This situation will affect the development of Vietnam.

With the above-mentioned situation and forecast, in its second session, the 8th National Assembly approved objectives, tasks and solutions for the 2012 socio-economic development as follow:

The overall objectives

Give priority to curbing inflation, stabilizing macroeconomy, maintaining a reasonable level of growth associated with a new growth model and restructuring the economy, improving quality, efficiency and competitiveness of the economy; ensuring social welfare and social security, improving the people’s lives; sustaining political stability, strengthening national defense, security, public discipline and social safety; improving foreign affairs and international integration.

Expected main targets

Gross domestic product (GDP) increases by about 6 to 6.5% compare to with 2011, total export volume in 2012 increases by 13% compared to 2011; trade deficit is equal to 11-12% of total export volume; budget deficit is equal to 4.8% of GDP; total capital investment for development in the society is 33.5% of GDP; consumer price index is less than 10%.

Indicators of social issues and environmental protection are agreed with positive view on the basis of viewpoint to ensure targets in both social security and environmental protection even in the toughest conditions. 1.6 million new jobs are created; urban unemployment rate is 4%; skilled labourers are accounting 46% of the total employees working in the economy; poverty rate decreased by 2% in general, and specifically by 4% in 62 poor districts; malnutrition rate of under-5-year-old children is below 16.6%; 79% of seriously polluted businesses are handled; 70% of industrial zones and export processing zones having centralized wastewater treatment system that satisfies environmental standards; forest coverage rate is 41%.

Key policy solutions

In 2012, the Government of Vietnam focus on six major solution groups which are continue to implement solutions to curb inflation, stabilize macro economy through cautiously operating fiscal and monetary policies; take stepwise restructure of the economy associated with a renewed growth model so as to improve efficiency and competitiveness; further enhanced and take advantage of effectiveness in foreign affairs and international cooperation, as well as improve the efficiency of integration; improve the quality of socio-economic planning and forecasting; strengthen the effectiveness and efficiency of state management and anti-corruption; enhance the information.

Restructuring of the economy

At the second session of the 8th National Assembly approved goals, tasks and solutions for socio-economic development in the five-year period (2011-2015) and the main content of restructuring the economy. In the five year from 2011 to 2015, attention is paid to three key areas, including investment restructuring with focus on the restructuring of public investment; corporate restructuring of state enterprises, economic groups, state corporations; financial market restructuring with focus on restructuring the system of commercial banks and other financial institutions.

To overcome the shortcomings, limitations existing in the recent time and improve the investment efficiency, in the coming future the investment restructuring must be based on the following principles:

Gradually adjust the investment by decreasing the proportion of public investment in total investment of the society and improve efficiency; overcome the spreading investment, and enhance measures to mobilize capital from economic sectors domestically and internationally for the investment in infrastructure development.

For the state budget, government bonds must be directed to focus on irrecoverable investment in building infrastructure, firstly for essential and large works of the country and provinces, investment in education and training, science and technology development, national defense and security, health care, culture and social security. For the construction of recoverable soci-economic infrastructure, combination of multiple sources in raising capital, including foreign capital, is required.

Revise regulations in management decentralization of public investment, especially investment from the state budget and government bonds. The principle that investment decision is made only with clearly defined capital sources and ability to balance funds in each budget level should be observed. Adopt the mechanism to balance the capital sources in the medium term investment plan consistent with the five-year socio-economic development plan.

For funding support from the central state budget through national targeted programs, targeted programs and other targeted assistance, the project approval decision must be tightly controlled and supported by the appraisal of capital sources and ability to balance funds made by a competent central authority. Promulgate regulations to approve the project list and total public investment of ministries, sectors, localities, state economic groups and corporations consistent with the objectives, tasks and orientations set in the five-year plan and budget.

At the same time, strengthen the monitoring, inspection, control and strictly handle violations of investment management mechanism for both teams and individuals with specific regulations, which are strong enough to rebuild public investment disciplines.

To improve the operational efficiency of state enterprises, the SOE restructuring in the coming future should focus on the following major measures:

Improve mechanism and policies to manage enterprises with state capital, firstly clarify rights and responsibilities of owners, owners’ representatives and managers; the management mechanism of state capital and assets in enterprises; monitoring and sanctioning mechanism.

Recognize, reform and equitize state enterprises in accordance with features of each group, corporation and company. Divest state capital in equitized enterprises that dominant state share is not necessary.

Continue to renovate corporate management mechanism in state enterprises along with the focus on training management staff capable of managing the enterprise; pilot the hiring domestic and foreign experts for business management.

Restructure financial market and develop capital market, gradually reduce the mobilization of investment capital mainly from bank credit, gradually expand funding channel through the stock market and other financial institutions. Restructure the banking system, credit institutions towards reducing the number of institutions, increase size and improve the credit quality and banking efficiency. Increase the share of revenue generated from banking services.

Simultaneously, implement other synchronous measures to restructure other financial institutions, such as people’s credit funds, insurance companies, financial companies and financial funds, security companies.

Step by step adjust prices of goods and services of public services following market-driven orientation with state management, in order to promote investment from other economic sectors to further develop the market and quality of public services.

Khac Kien

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