Is reality dawning and are we about to enter the second phase of Doi Moi?
21 Nov 2016
After the advent of Doi Moi, in 1986, and in the years from 1990 to 2010 Vietnam achieved an average GDP growth of over 7% per annum. In the period 2011-2015 GDP growth averaged only 5.9% due to slow moving structural reforms and global uncertainty.
One of the most discussed reasons is the very slow pace of equitisation (privatisation) and the slow IPO process of equitized State Owned Enterprises (“SOE’s). The Ministry of Finance recently reported to the National Assembly that Vietnam’s SOE reform has progressed at a snail’s pace.
From 2011 to late 2016, 557 enterprises had their equitisation plans approved however, only 426 have completed their IPO’s of which only just over half (254) have sold stakes with a total value of less than US$ 2 billion.
In addition, the growth of productivity, in Vietnam, is amongst the lowest in ASEAN averaging only 2.3% in the last 15 years.
The National Assembly has recently been debating the new economic restructuring plan for the period 2016-2020 compiled by the Ministry of Planning and Investment,, which seems to go a long way to addressing some of the historical issues and short comings.
Vietnam will target an average growth rate of 6.86% with an average budget deficit of 4.89%. Minister Chi Dung also stated that “The States management will be comprehensively renewed, with a strong reform of all economic institutions and the development of a more business friendly Government” he also added that the State’s role as a trader and direct investor will be reduced.
According to the Country Economist for the Asian Development Bank, in Vietnam, the structural reform agenda is essential to the country’s long term development and for Vietnam to follow the rapid development seen in South Kore, Taiwan and China it needs growth rates of 8-9% per annum.
The willingness seems to be there on the part of the Government, which continues to portray itself and acts as a pro business administration. It is clear to all what needs to be done but whether the Government can get all stakeholders aligned is the big question.