The 8th session of the 13th Vietnamese National Assembly (NA) opened in Hanoi on October 20 with a heavy agenda. During the 35 working days, the longest session of this tenure so far, “the legislature is expected to adopt 18 draft laws and three draft resolutions, and debate 12 other draft laws,” according to theNA website.
Addressing the opening session, NA Chairman Nguyen Sinh Hung touched upon three main global problems–economy, armed conflicts and epidemics in many areas of the world—to frame Vietnam’s profile. In Vietnam, while the macro-economy maintains its stability and the national economy is on a track of recovery, “many difficulties remain, threatening sustainable development and problems in social and security situations are causing concerns among the public,” the NA Chairman said, adding that complex developments in the East Sea—as Vietnamese refers to the South China Sea–also have a remarkable impact on the country’s socio-economic development.
Economy was the main issue underlined also by Vietnamese Prime Minster Nguyen Tan Dung in his opening speech. And despite a promising outlook for 2015, inefficiency, bad debt and weak domestic sentiment will keep a lid on growth, the country’s prime minister said.
Dung set out targets of 6.2% for Gross domestic product (GDP) growth and an inflation rate of 5%; a 1.7-2% decrease in poverty overall and a 4% decrease in poverty in disadvantaged localities; and 1.6 million new job opportunities. After having grown 5.42 % in 2013, according to government data, Vietnam’s economy has been picking up steam this year with a recorded third quarter’s annual growth of 6.19%, from 5.42% in the second quarter and 5.09% in the first three months. Economic growth is in line with the credit growth rate, that in the first nine months of the current year reached 7.26% and according to Dung is likely to increase to 12-14% by the end of the year.
According to the observers, the rise recorded in recent months and positive projections for next year are driven by strong exports and a booming manufacturing sector. Nevertheless, “the macro economy and major economic balances are not sustainable […] Economic growth has made a step towards recovery but the business environment and productivity, efficiency and competitiveness of the economy remain low,” Dung said quoted by Reuters and citing a high state budget deficit and fast rising debt. According to the government report to the legislature, bad debts rose to 3.9% of bank loans at the end of August from 3.61% at the end of 2013. Moreover, foreign debt is forecast to rise to 39.9 percent of gross domestic product in 2014, from 37.3% in 2013, while the annual trade surplus was revised up to $1.5 billion, from a surplus of the $0.5 billion forecast previously
“The government’s target of 6.2 percent GDP growth for 2015 will be unrealistic if it doesn’t boost investment higher […] Unless the government can boost total investment to 33-35 percent of GDP, it will be very difficult,” member of the National Assembly economic committee Tran Hoang Ngan said, as quoted by Bloomberg.
Vietnam is pushing ahead with its plan for restructuring state enterprises, with 71 such businesses selling shares in the nine months through September this year, compared to 74 for all of 2013, Dung said. The government plans to reach a total of 200 companies by year-end, he said. A few days after Dung’s speech, the Ministry of Planning and Investment was asked by the government to withdraw its proposal for using the State budget to settle bad debt of State-owned enterprises (SOEs). There are about one thousand SOEs in operation with a total debt at US$80 billion.
Adding to this, “corruption in the public sector remains serious, especially in finance and banking, land management, natural resources exploitation, and public investment,” Huynh Phong Tranh, chief of the Government Inspectorate, remarked in his speech. The 2013 Corruption Perceptions Index, which measures the perceived levels of public sector corruption, saw Vietnam advance just seven spots to 116th out of 177 countries with a score of 31/100.
Apart from the economy, Dung said that Vietnam is involved in a territorial dispute with China which has strained bilateral ties. China’s action has “seriously threatened peace, stability and the socio-economic development of the country”, he said. However, despite the standoff in the South China Sea, where both governments claim sovereignty over the Spratly and Paracel archipelago, their trade relationship has been increasing since the beginning of the year with a total turnover reaching US$50.21 billion in 2013, up 22 percent year-on-year, with a deficit of US$23.7 billion. In the first seven months of the current year, Vietnam recorded a deficit with China of US$14.57 billion, an average of 2.08 billion US dollars per month.
