Capital absorption capacity in the economy remains weak


At the third-quarter meeting of the National Financial and Monetary Policy Advisory Council, chaired by Deputy Prime Minister Vuong Dinh Hue, most of the council members gave a positive evaluation of the management of financial and monetary policies over the past months of 2019, besides making key recommendations for forthcoming tasks in the remaining months of the year.

Illustrative photo.

Illustrative photo.

Vietnam’s economy has performed very positively over the last nine months, achieving many important results, despite a slowdown in global and big economies along with complex developments in the financial markets and in global trade.

GDP growth rate in the first nine months of 2019 increased by 6.98%, in line with the target based on the GDP growth rate of 6.8% this year. Inflation is still under control as it grew only 2.5% in last nine months, the lowest level in the past three years because the price adjustment of some state-controlled items was lower than in previous years. The price of raw materials for fuel dropped sharply according to the price of global goods while other commodity groups had no price change.

The state budget collection was extremely high at VND 66,550 bn, because spending of investment capital for enterprise development has gradually improved. Government revenue is high in important business areas such as in domestic businesses, crude oil, import and export activities, with nearly 73% of the estimate until September 15. This shows that economic activities were positive at this time. Besides, balance of surplus payment is now over USD 10 bn. The stock market has achieved a growth rate of over 10%, compared to the end of 2018. Corporate bond issuance has increased sharply, contributing to reduction in the burden of capital supply for production and business of bank credits. By the end of the second quarter of this year, the corporate bond market had reached VND 586,000 billion, equivalent to 10.6% of the GDP.

However, council members expressed concern that capital absorption capacity of the economy remained weak due to institutional obstacles, which has led to delays in the allocation and disbursement of public investment capital, enterprise development, investment and business environment improvement, difficulties in private investment, and implementation of public-private partnership projects (PPP).

If the Government fails to remove these bottlenecks, it would be difficult to achieve faster growth, and even economic growth could slow down in the near future. For example, some council members mentioned the quality of foreign investment, noting that the number of invested foreign projects with modern technology and global production chains in the last nine months increased by 26.4%, but their registered capital had dropped 22.3% compared to the same period this year.

On the other hand, the Government should not have any restrictive or inadequate regulations that could limit the corporate bond market, because policy on this market development is indispensable. With the aim of controlling the corporate bond market, the Government revised Decree No. 163/2018/ND-CP which is meant for regulations on issuing corporate bonds, and simultaneously strengthened business rating services, and also increased supervision and control to ensure the market stays healthy. If there are any recommendations, the Government will consider and guarantee corporate bonds and bonds for implementation of important national projects.

For import and export activities, the Government should keep diversifying markets, especially boost the export of goods to China through official channels, and complete standards and regulations relevant to Vietnamese origin, to fight tax evasion and trade fraud. Besides, the government must actively work with other countries, particularly the United States, to deal with trade-related issues and not use the price tool to support export.

Deputy Prime Minister Vuong Dinh Hue said that these important recommendations will help the Government and the Prime Minister to continue socio-economic governance in the remaining months of this year to be able to create a solid foundation for 2020. Accordingly, the Government will complete the relevant laws for attracting FDI as well as overcome risks by finding ways of selecting and controlling investment in accordance with Resolution No. 50/ NQ-TW, by the Political Ministry, on orientation towards improvement of policies, institutions and quality.

Following this, it is recommended to avoid attracting or cooperating in areas with excessive capacity. Due to the present on-going trade war, transferring technology of projects from other countries or in other sensitive areas like energy, seaports, railways, especially projects relating to security and national defense issues are very limited.

Translated by Thúy Hằng

Tran Hai

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