ベトナム・日本学生学術交流 グェン・フン・クォツ先生の基調講演 その②

 

引き続き、VJSE2013  第6回ベトナム・日本学生学術(科学)交流ミーティングにおけるグェン・フン・クォツ先生の基調講演を掲載いたします。

 

SOEs’ Inefficiency

➢ Disproportionate contribution of SOEs to the economy:
SOEs hold 45% of total fixed assets, 39% of total capital, and 27% of total b t credit but only contribute 17% of employment and 27% of total outputs
➢ Privileges to SOEs distort the market economy. Bankruptcy and default of large SOEs such as Vinashin severely damages credit ratings of Vietnam in the international market.

 

 

Ineffectiveness of public investment

➢ Public investment accounts for about 40% of total investment and is about 17% of GDP
➢ However, Vietnam has been allocating its scarce public resources in fragmented and suboptimal way by building airports, seaports, and industrial parks and economic zones in almost all provinces
By May 2012, Vietnam has 267 Industrial Parks, 8 Coastal Economic Zones, 22 airports (8 international), 22 international seaports, 20 Key Economic Zones
If all approved infrastructure projects were implemented then Vietnam would have one of the highest numbers of seaports, airports, and industrial parks in the world relative to its economy size
Jackfruit Economy (Nen kinh te qua mit)
➢ The addiction to investment has been attributed by the political balance between the central and local government

 

Changes in Political Balance

➢ Political voice from local has become increasingly influential:
# of Central Committee members who are representative from local provinces has increased over time
・ This was initiated by CPV Secretary General Nguyen Van Linh, who came from HCM and wanted to obtain support from reforming forces from local provinces during Doi-Moi
・ Empowered with more fiscal autonomy and power to approve FDI projects (Decree No. 108/2006)
Localism/Regionalism has become stronger in both politics and the economy
・ Can hinder the central government from implementing efficient macro policy. E.g. every province wants to have an airport, a seaport and Key Economic Zone, etc
・ Can collude to form influential interest groups that impede other reforming forces

 

Recent Turbulence and Policy Response

➢ The economy became over-heated in 2007-08 after its WTO accession
Over-optimism about Vietnam’s economy and a massive capital inflows caused money supply and credit to increase by 50% and investment to increase by 27% in 2007
・ Inappropriate monetary policy response of State Bank of Vietnam
Overheating economy combined with rising international foods and energy fueled inflation rate up to 20% in early 2008

➢ The government responded by announcing Resolution No. 10/NQ-CP (Apr. 2008) to cool off the economy by tightening and obtained some successes but unfortunately that is only a very short-time before the global crisis struck in
FYI: The collapse of Lehman Brothers in Sept. 2008
➢ In response to the worst global recession in many decades, the Government had no choice but reversing their tightening policy. That was right, BUT…
➢ Given the weakness and distortions of the economy in the banking sectors and the State sector that was accumulated over time due rapid growth without much institutional reform, the stimulus package was:
Too large and generous: 8% of GDP
Too long: the government was late in withdrawing the package partly because of political considerations for the 11st Communist Party Congress in early 2011
・ One of the main reasons that caused 2011-12 economic turbulence and current economic recession/crisis

 

2011-12 Turbulence and Resolution 11/2011

➢ The economy became over-heated again in 2011-12:
The stimulus package was kept too long: interest rates were relatively low and total credit growth increased by 45.6% in 2009, 25% in 2010, causing real estate bubbles
・ In 2011, land prices in Hanoi were as high as in New York and Tokyo
・ Rising land prices/collateral encouraged further bank lending, many of which were between group lending so were imprudent and are the main causes of current bad loan problems when the bubbles burst in 2012
World food and energy prices increased again in 2011
Inflation accelerated from 11.8% in Dec. 2010 to 23% (yoy) in Aug. 2011
➢ The government responded again by announcing Resolution No. 11/2011 to cool off the economy by tightening fiscal and monetary policy, which then followed by Directive No. 1/CT-NHNN that:
Put credit growth ceiling of 20% and money supply ceiling of 15%
Reduce banks’ exposure to real estate and stock markets by limiting credit toward “nonproductive” sectors to 22% of total loans by June-2011 and 16% by end-2011
One of the main reasons that caused the burst of the real estate bubbles

 

Current Economic Situation

➢ Thank to Resolution No. 11/2011 and Directive No. 1/CT-NHNN
Inflation was gradually controlled by end-2011 and was only at 6.81% in 2012
Success? Yes if we only care about inflation BUT…
Growth rates dropped to 5.9% (2011) and 5.03% (2012) and no signs of improvement in 2013 yet
Highest number of bankrupt companies and lowest credit growth in 2012 since
Doi Moi
・ Because of the recession, firms don’t want to borrow any more.
I In 2012, thank to the burst of real estate bubbles bad loans account for about 10% of the total banking assets, which are about 200% of annual GDP
・ The ratio of bad loans might be even higher according to international institutions
All problems, distortions and weakness of the Vietnam economy have been left unsolved
Driving the economy with too much acceleration and too hard and sudden brake

 

Some Perspectives

➢ Results/Fruits of the 1st Doi Moi are diminishing fast and Vietnam is at a crossroad:
Continue reforming to follow the development path of Taiwan, S. Korea or be trapped in the lower mid-income group?
➢ Current very bad economic situation may be the condition for a 2nd Doi Moi?
➢ Some positive things
The newest draft of the Constitution-2013 removes the “leading role” of SOEs and might take away many privileges of SOEs
Trans-Pacific Partnership (TPP) is definitely not a free party but may offer a good chance to foster further economic reforms
➢ Hopefully, there will be emergence of strong leaders with reforming minds

 

End of the Talk
Thank you!