Just on the threshold of the eighth session of the 14th National Assembly (NA), the legislature’s Standing Committee organised a meeting to prepare for the session.
Unlike previous sessions focusing on discussing many different issues simultaneously, this session, which will last from October 21 to November 14, has been set to place a bigger focus on discussions about specific measures to boost economic growth, and about how Vietnamese businesses can be further supported to overcome difficulties.
Recovery
The Ministry of Planning and Investment (MPI) reported at the meeting that since early this year, in general the economy has been strongly bouncing back, with businesses health improving.
The economy grew 7.31% year-on-year in the third quarter of 2019, higher than the year-on-year climbs of 6.73% in the second quarter and 6.82% in the first quarter. The rate expanded by 6.98% year-on-year in the first nine months, also the highest year-on-year nine-month ascension over the past nine years.
In the first nine months of 2019, there were a record 102,300 newly-established enterprises, with a total registered capital of VND1.29 quadrillion (US$56 billion), up 5.9% in the number of enterprises and up 34% in capital, on-year. The average registered capital of each enterprise is VND12.6 billion (over US$547,800), up 26.6% on-year.
“This result has been made by the government prioritising boosting the reform of the domestic investment climate, creating the best conditions to people and enterprises, especially the simplification and removal of administrative procedures that can help save costs for enterprises,” stated MPI Minister of Planning and Investment Nguyen Chi Dung.
So far, 3,551 out of 6,191 business conditions have already been removed, while specialised inspection for nearly 6,800 out of nearly 1,000 lines of exported and imported products have also already been phased out. It is expected that from now until next year, more conditions and inspection will also be slashed in favour of enterprises.
Nicolas Audier, chairman, European Chamber of Commerce in Vietnam (EuroCham), said that European businesses “remain confident about doing business in Vietnam and optimistic about the future prospects of trade and investment in the country.”
“Our Business Climate Index, in which hundreds of EuroCham members give us their opinion on Vietnam’s business climate, continues to show strong results,” he said.
Specifically, the second quarter of 2019 saw a slight increase in positive sentiment from 79 to 80% from the first. Almost 70% of EuroCham members predicted that their company’s outlook would be just as good - if not better - than the previous quarter.
“This confidence reflects the Vietnamese government’s huge progress in reforming Vietnam’s trade and investment environment over the last few decades,” Audier said.
Difficulties ahead
At the NA’s Standing Committee meeting last week, NA Chairwoman Nguyen Thi Kim Ngan stated that despite businesses’ health in general significantly improving, from now until the year’s end and next year, the economy is expected to face numerous difficulties caused by global uncertainties, trade protectionism, and trade conflicts.
“This will surely have negative impacts on Vietnam’s production and exports, especially when many local enterprises remain in difficulties and economic growth remains not quite sustainable,” she said. “Thus, at the coming National Assembly session, more specific solutions to assist enterprises and cope with external difficulties must be made.”
Echoing this view, Minister Dung also stated, “Domestic industrial production still largely depends on imports – especially the textile and garment, and footwear sector, and steel for the mechanic sector. Enterprises’ technology remains limited, and the economy’s internal strength is still weak, with the majority of enterprises being small- and medium-sized ones who have yet to join the global production and value chains.”
For example, in the first nine months of 2019, the agro-forestry-fishery sector grew only 0.74%, only higher than the 0.02% in the same period of 2016, within the 2012-2019 period, due to droughts, climate change, and saline intrusion heavily affect output and productivity of crops, and due to the African swine fever (ASF) effecting the animal husbandry sector.
So far, the ASF has been occurring in all 63 provinces and cities nationwide, with nearly five million ASF-hit pigs being destroyed.
A source from US-backed Cargill Vietnam said that like any other players in the industry, Cargill has been impacted by ASF as swine feed volume has been decreased due to the reduction in pig populations because of ASF outbreak.
“ASF will drive down demand for animal feed in Vietnam. Many livestock households are selling uninfected pigs at any price, regardless of whether the pigs are fully grown or not, and are even selling sows. ASF will significantly change the livestock market as thousands of small scale farmers are driven out of business and larger commercial farmers continue to grow and integrate.
Meanwhile, the government also reported that the industrial and construction sector is now facing difficulties. In the first nine months of 2019, the sector grew 9.36% year-on-year, lower the year-on-year rise of 10.6% in the same period last year.
“These difficulties must get due attention and must be carefully discussed at the National Assembly’s upcoming session. The government needs to increase inspections at ministries and localities in order to ensure the effectiveness of the government’s efforts to reduce and remove unnecessary business conditions, and boost the reform of administrative procedures,” said Vu Hong Thanh, Chairman of the NA’s Economic Committee.
Seeking solutions
Recently, the government outlined some key solutions for supporting enterprises and economic development (see box).
Thanh also stressed, “I think that one of the best solutions to support enterprises is to quickly and truly remove unnecessary administrative procedures in all business sectors, especially investment, construction, transport, and education.”
“All processes and procedures must be truly made transparent and open, with all violators being strictly punished in order to eradicate unofficial costs for people and enterprises,” he continued.
The World Bank has also pointed out a series of challenges for Vietnam to seek solutions.
According to the bank, despite improved short-term prospects, there are significant downside risks. Domestically, a slowdown in the restructuring of state-owned enterprises and the banking sector could adversely impact the macro-financial situation, undermine growth prospects, and create public sector liabilities.
Vietnam’s economy also remains susceptible to further volatile developments in the global economy, given its high trade openness and relatively limited fiscal and monetary policy buffers. Weaker external demand and heightened global financial volatility call for a continued focus on sound macroeconomic management to safeguard against possible shocks, the bank said.
| Box 1: According to the tentative agenda of the NA’s eighth session, one of the biggest highlights of the session is that the legislature will earmark three days for question-answer (Q&A) activities. It is expected that Q&As will be revolve around issues that have drawn special attention from the public, such as appointment of state officials and officers, exam fraud, public investment, and also cases involving violations from officials. Besides, the legislature will consider and adopt 10 laws, including Labour Code (amended), Securities (amended), Library, Militia and Self-defense Forces, Immigration for Vietnamese Citizens, amendments to the Law on Governmental Organisation and the Law on organising the Local Government, amendments to the Law on Cadres and Civil Servants, amendments to the Law on State Auditing, Mobilisation Forces, and amendments to the Law on National Assembly Organisation. Besides, the legislature will also review, debate and give opinions on a socio-economic report on the socio-economic and state budget situation of 2019, and socio-economic orientations for 2020. |
| Box 2: A number of key solutions and tasks to support enterprises and economic development • Drastically boosting the improvement of regulatory frameworks in order to create a more business friendly climate for enterprises and investors. |
