In a recent interview with Xinhua, Tomoyuki Kimura, country director of Asian Development Bank (ADB) in Vietnam, said that in 2014, the Vietnamese government has done "a very good job" in keeping the country's macro-economy stable.
Kimura said that 2014 is the third consecutive year when Vietnam showed consistent positive macro-economic indicators with inflation kept very low, foreign exchange rate stable, and foreign exchange reserves substantial.
In a report on socio-economic situation in 2014 and targets for 2015 delivered at the yearend meeting of the National Assembly (NA) in Hanoi, Vietnamese Prime Minister Nguyen Tan Dung said the country's gross domestic product (GDP) is estimated to grow by 5.8 percent this year, which is higher than the 5.42 percent GDP growth in 2013.
In 2014, the country's total export earnings could post a year- on-year increase of 12.1 percent (surpassing the set target of 10 percent), bringing the country's exports receipts to about 148 billion U.S. dollars.
Latest figures by Vietnam's General Statistics Office showed that Consumer Price Index (CPI), the main gauge of inflation, in the 11-month period of 2014 increased by 2.08 percent over December 2013, the lowest growth rate in 11 years. The country is expected to see only 5 percent inflation rate in 2014, far below the target of 7 percent.
Kimura said that Vietnam's central bank has provided sufficient liquidity that has stimulated economic activities and led to good GDP growth ratio as well as improved credit growth.
According to a government report, credit growth has improved during recent months, staying at over 10 percent as of the end of November, the same rate in December 2013.
Despite the positive achievements in economic development, the ADB official said the government needs to continue its efforts to address some structural weaknesses which could lead to the recurrence of the macroeconomic instability in the past.
"There has been some progress in adopting viable policies but implementation of these policies has been slow," Kimura said.
He particularly cited the restructuring of state-owned enterprises (SOEs) to make them more efficient and competitive by opening their capital equity to private investors.
"However, just rushing for initial public offering (IPO) when there is no enabling environment does not really serve this purpose, because to get strategic partners through IPO so that SOEs can be better managed and more efficient, they really need to attract good investors," he said.
Kimura said that to do so, many of the SOEs must first restructure their own business, clean up their balance sheet, and divest from non-core businesses. "Without these restructuring efforts, by just going to the IPO market will not have the desired effect," he said.
Government statistics show that as of September this year, a total of 92 SOEs have already been restructured, of which 71 have new equity partners, two were dissolved, one was sold, 15 were merged and three others were declared bankrupt.
Despite the positive economic indicators and tangible improvements in business and investment environment, the country's competitiveness still lags behind other countries.
According to the yearly global competitiveness report by the World Economic Forum (WEF) released in September, Vietnam still ranked 68 out of 144 economies in the competitiveness list for 2014-2015, only making minor progress compared to 70/148 in 2013- 2014 and 75/144 in 2012-2013.
Kimura said that while the Vietnamese economy is already very open to the global market, it still needs to increase its integration into the global market through various trade agreements. "The country really needs to improve its competitiveness so that it can take advantages of the opportunities offered by foreign investors," he added.
According to the Vietnamese government, during the first 11 months of 2014, Vietnam's total export value was valued at 137 billion U.S. dollars. Among that, the foreign investment sector ( including crude oil) accounted for over 92.2 billion U.S. dollars, or 67.3 percent of the country's total.
"To change the situation, there is a need to strengthen the role of the domestic private sector in the country, particularly small and medium-sized enterprises (SMEs) so that they can play a bigger role in regional and international supply chain," Kimura said.
Kimura also noted that the government is committed to solve the issue of bad debts or non-performing loans (NPLs) in Vietnam, saying that the central bank has been managing the country's banking sector prudently. "The market has received some strong signals that the government is committed to address the issue of NPLs," he said.
The establishment of the 100-percent state-owned Vietnam Asset Management Company (VAMC) in mid-2013 was among the measures aimed at resolving bad debts, according Kimura.
VAMC is a one-member limited company, with a registered charter capital of 500 billion Vietnamese dong (roughly 23.6 million U.S. dollars), and is managed, supervised and inspected by the State Bank of Vietnam (SBV).
The VAMC is allowed to buy bad debts from banks, recover debts and put collaterals up for sale as well as restructure debts. It will also adjust the conditions on loans and convert debt into equity. It is allowed to consult and act as a broker to trade debts and assets, make financial investments and purchase sales as well as auction off assets and provide guarantees for businesses and individuals so they can access bank loans.
According to government statistics, NPLs of credit organizations in Vietnam reached 3.9 percent of the whole credit system's total loans as of the end of August 2014. In January- September period, as many as 53.6 percent of the country's NPLs have been handled through debt collection, sales of debts and secured assets, debt restructuring and use of risk reserves.
