Imprint of government operation

Friday, 2016-02-05 17:14:58
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Many international organisations recognise Vietnam's advances on the global competitiveness ranking (photo: Duy Linh)
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NDO - Thanks to the government efforts, 2015 was a successful year for Vietnam with the economic growth rate at 6.68%, a low inflation rate, stable monetary market, and improved business environment among others.

According to ANZ Bank. Vietnam’s economy was a rare source of light amidst the gloom in most emerging markets in 2015 and was among the three nations with a better outlook in Asia.

Vietnam's GDP growth rate of 6.68% was the highest level in the past eight years, surpassing the set target of 6.2%. The size of GDP at the price in 2015 was US$204 billion and the average GDP per capita was US$2,228.

The industry and service sectors accounted for 82.5% of the GDP. The rate of public investment went down from 35.5% in 2010 to 30% in 2015 while the rate of private investment increased from 36.1% to 42%.

Remarkably, in the past four years, the Incremental Capital Output Ratio (ICOR) and the level of production efficiency were improved. In 2015, the total investment capital was equivalent to 31.2% of GDP while the GDP growth rate was 6.68%. In 2014, the total investment capital was equivalent to 31% of GDP while the GDP growth rate was 5.98%. In 2013, the total investment capital was equivalent to 30.4% of GDP while the GDP growth rate was 5.42%. In 2012, the total investment capital was equivalent to 33.5% of GDP while the GDP growth rate was 5.03%.

These achievements were attributed to timely policies by the government, helping lower deposit and lending interest rates and operate exchange rate in a flexible manner to stimulate investment and stabilise the monetary market. Despite lowered interest rates, deposits in 2015 increased by 13.59% compared to 2014, enabling credit institutions to supply more credit to the economy.

The government also implemented policies to reduce, extend and exempt taxes for enterprises combined with expanding the domestic market and encouraging the Vietnamese people to use Vietnamese goods, helping promote production capacity and create jobs for more than 1.6 million people.

Last year, the government focused on stimulating investment and increasing investment sourced from State budget and government income in transport, energy, agriculture, education and health infrastructure along with adopting measures to attract foreign investment and development assistance capital.

At the government's regular meeting in September 2015, Prime Minister Nguyen Tan Dung said that the administration should not be complacent about initial results but they should take more drastic and practical measures to deal with issues of concern including tax, customs, insurance, and land among others.

At the National Assembly (NA) session in November 2015, the government pledged to make every effort to fulfil all targets set by the NA for 2015 and would hasten the implementation of the NA resolutions on socio-economic development in early 2016.

According to the General Statistics Office (GSO), the consumer price index (CPI) in December 2015 only increased by 0.02% compared to the previous month and the CPI in 2015 post the 14-year low at 0.6%. Deputy Director of the GSO’s Price Statistics Department Do Thi Ngoc said that inflation saw a downward trend and was gradually stabilised, demonstrating the flexible and active operations of the government and the State Bank of Vietnam (SBV) in curbing inflation. In the past two years, the inflation rate was around 2-3%, a reasonable rate to stabilise the economy, Ngoc noted. In addition, the control of non-performing loans has been improved with the increase of drastic and comprehensive measures to settle these loans.

In the first eight months of 2015, the government directed the SBV to buy out three distressed commercial banks at 0 Vietnamese dong including the Vietnam Construction Bank, Ocean Bank and GP Bank and three other banks were merged into others which was assessed as an appropriate measure, helping replace weak board of directors, maintain operations of these banks while stabilising the whole banking system.

In particular, the government established an inter-sectoral steering committee to implement the project on restructuring the system of credit institutions in the 2011-2015 period and to implement the project on the settlement of non-performing loans of credit institutions. Thanks to this move, the total outstanding loans increased 17% in 2015, the highest level since 2011 and the rate of non-performing loans was reduced from over 17% in 2011 to 2.9% of the total outstanding loans in 2015.

In November 2015, Fitch Ratings affirmed Vietnam's long-term foreign and local issuer default ratings (IDRs) at 'BB-' with a stable outlook. The agency also forecast a budget deficit of 5.4% of GDP in 2016.

Last year, the business environment and opportunities in Vietnam were improved considerably due to the advances of the real estate market and domestic purchasing power along with the slight decrease in business costs.

The Finance Ministry and the General Department of Taxation carried out many solutions to reform administrative procedures related to tax and hasten the progress of online tax services, contributing to cutting 370 hours for tax payment for each business in 2014 and 50 hours for tax payment for each business in 2015. As a result, the total tax filing hours were reduced by 420 hours (from 537 hours per year to 117 hours per year), equivalent to 78% of the total tax filing hours.

Such progress was recognised by many international organisations. Vietnam rose three places on the World Bank's business environment ranking and moved up 12 places on the World Economic Forum's Global Competitiveness Index.

Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said the years 2014 and 2015 were important, starting a new period of institutional reforms to create new motivation for the economy through the issuance of various new laws and resolutions related to business environment, enterprises, investment and others. It can be seen that institutional reform and market liberalisation are becoming two main driving forces for the economic development.