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Official Gazette

Tuesday, November 29, 2022

Vietnam sets course for economic restructuring

Updated: 15:27’ - 29/03/2013

Prime Minister Nguyen Tan Dung last month approved the master plan on economic restructuring after it was debated by the National Assembly in November 2012. Many Vietnamese scholars expect this master plan will lead the country into the second stage of national economic renewal. 

Vietnam will basically form by 2020 a new model of economic growth emphasizing quality and increasing the efficiency and competitiveness of the national economy.

This goal is set by the recently approved master plan on economic restructuring in association with changing the growth model toward increasing quality, efficiency and competitiveness during 2013-20.

According to the Ministry of Planning and Investment, the drafting agency, the title of the master plan shows a new approach aiming at increasing the competitiveness of the economy.

The salient point of the master plan, said Dr. Nguyen Dình Cung, Deputy Director of the Central Institute of Economic Management (CIEM), is the process of re-distributing resources in the whole country and the entire economy in order to incrementally and continuously increase the efficiency of the economy.

Under the master plan, the Government will complete socialist-oriented market economy institutions, create a system of rational, stable and long-term stimuli, especially tax incentives and other investment-promoting measures, and step up the distribution and use of social resources mainly under the market mechanism for sectors and products with competitive edge to increase their competitiveness.

The Government will form and develop a rational economic structure on the basis of improving and upgrading the development levels of sectors, fields and economic regions. It will develop sectors and fields using high technology and creating high added value in order to step by step make sectors with low technology and low added value, and eventually become key economic sectors.

Vietnam will step by step consolidate the domestic economic strength, take the initiative in international integration and strengthening of its position in the international arena while firmly preserving political stability and assuring national security, social order and safety.

The master plan states that the roles and functions of the State and the market will be clearly delineated in the direction of minimizing barriers, creating a motive force to encourage the shift, allocation and use of production elements, especially capital and human resources, based on market signals. The State’s role of creating and supporting development will be promoted through mechanisms, policies and economic leverages. The use of interfering administrative measures will be minimized.

The Government will harmoniously combine the tackling of important and urgent issues with the settlement of fundamental and long-term issues aiming at sustainable development, giving priority to medium- and long-term objectives and growth quality. Economic growth must come along with inflation control, stabilization of the macroeconomy, realization of social progress and justice, preservation of typical traditional cultural values and environmental protection.

The Government will bring into full play competitive advantages of sectors, fields, economic regions and localities; attach importance to agriculture while strongly developing services and tourism. Vietnam’s economic structure will be composed of key economic sectors as the core and diverse forms and types of businesses able to adapt to rapid overseas and domestic socio-economic changes and achieve green, stable and sustainable economic growth objectives.

Economic restructuring will be associated with administrative reform. Administrative service quality in all sectors and at all levels, especially local and grassroots levels, will be improved.

The master plan reiterates that Vietnam will continue implementing the open-door policy and actively and proactively engage in international integration. Resources will be mobilized to the utmost from the people and all economic sectors, especially overseas and domestic private sectors, and effectively used for socio-economic development.

Restructuring orientations

The master plan sets four orientations for restructuring the economy through 2020.

The first orientation is to maintain a favorable and stable macroeconomic environment.

For achieving so, the Government will continue implementing effective and prudent monetary policy, using tools of monetary policy in a flexible and effective manner. It will closely and synchronously combine monetary policy with fiscal policy to keep inflation under control and ensure macroeconomic stability and rational growth in light of the country’s socio-economic characteristics and conditions in each period.

The Government will consistently implement tight and effective fiscal policy, practice thrift, gradually reduce state budget deficit and maintain public debts at a rational level.

The Government will further promote export while restricting the import of commodities that are not encouraged or can be produced at home. It will strongly develop supporting industries and consumer commodity production industries.

In order to mobilize more resources for development investment, the master plan calls on all sectors and levels to introduce mechanisms, policies and solutions for forming a more favorable environment for attracting, and enhancing the effective use of, investment capital sources.

The Government will intensify price and market control and ensure balancing of supply and demand of essential commodities. It will keep a close eye on overseas and domestic market developments so as to promptly take measures to regulate supply and demand and stabilize the market. For electricity, coal, petrol and oil and public services, the Government will consistently implement the policy on price management under the state-regulated market mechanism according to a roadmap with suitable extent and time of adjustment in order to control inflation.

The second orientation is to drastically and effectively implement the focuses of economic restructuring.

Regarding investment restructuring, with the focus being public investment, the master plans states that resources will be rationally mobilized for development investment, ensuring total social investment of about 30-35% of GDP. The major balances of the economy such as savings, investment and consumption, state budget, trade balance, international payment balance, public debts and national foreign debts  will be maintained at a rational level.

The country will maintain a rational proportion of state investment, about 35-40% of total social investment and gradually increase savings from the state budget for investment. Some 20-25% of total budget expenditure will be earmarked for development investment. The mechanism of capital allocation and use management will be basically renewed, putting an end to thinned-out, dispersed and wasteful investments and increasing the efficiency of state investment.

The scope of and opportunity for private investment, especially domestic private investment, will be expanded to the utmost. Private investment will be encouraged and facilitated in infrastructure development, development of sectors and products with advantages and development potential, and in motive economic areas.

Regarding restructuring of the financial-banking system, the master plan reiterates the main ideas set forth in the Plan on restructuring the system of credit institutions during 2011-15 approved early last year.

Specifically, from now to 2015, credit institutions will focus on making their financial status healthy, first of all, handling bad debts, developing main business activities, assuring solvency and stable and sustainable development, tackling cross ownership and increasing transparency in their operation.

Vietnam will fundamentally, thoroughly and comprehensively restructure local credit institutions so that by 2020 the country will have a system of multi-functional credit institutions developing toward modernization and safe and efficient operation, with diverse structures of ownership, sizes and types, higher competiveness and applying advanced banking governance technologies in conformity with international banking practices and standards. The Government will ensure that no collapse and loss of safety occur in credit and banking operations, guarantee full and timely payment to depositors, and minimize losses and cost of handling risks arising in the system of credit institutions.

The Government will promote the leading role and dominant position of Vietnamese credit institutions. State-owned commercial banks and commercial banks in which the State holds dominant shares will truly be key and principal players in the system of credit institutions. By 2015 at least one or two state-owned or -controlled commercial banks will reach regional standards on scope, governance, technology and competitiveness.

The State Bank will assess and classify and apply appropriate handling measures to joint-stock commercial banks, financial companies, finance leasing companies and other credit institutions, focusing on those that are weak or commit serious violations, and closely supervising their restructuring according to approved plans. It will reorganize activities of people’s credit funds and micro-credit organizations, consolidate and handle weak ones, and facilitate their operation and development.

Foreign credit institutions will continue enjoying favorable conditions to operate and compete equally in Vietnam. They are encouraged to cooperate and associate with local credit institutions in developing new products, renewing governance, modernizing banking operations and handling difficulties facing local credit institutions in the process of restructuring.

For restructuring enterprises, particularly state economic groups and corporations, the Government plans to classify and reorganize state enterprises in the defense industry, industries of natural monopoly or manufacture of essential goods and provision of essential services and a number of key and hi-tech industries of great pervasiveness. It will accelerate the equitization and diversification of ownership of state enterprises in which the State does not need to hold 100% shares. State economic groups and corporations are urged to restructure their investment portfolios and business lines, concentrate on their core business lines, and accelerate under market principles the divestment of state capital from non-core business lines and from joint-stock companies in which the State does not need to hold dominant shares. They are required to fully apply modern governance methods according to good practices of a market economy.

State enterprises must strictly observe laws and comply with state administration discipline and market discipline. The incentive system will be reformed to ensure that state enterprises operate in line with the market mechanism and compete equally with enterprises of other economic sectors.

The above guidelines are similar to those determined in the Plan on restructuring state enterprises during 2011-15 approved by the Prime Minister last July.

The master plan also mentions the necessity to further step up the restructuring and improvement of the quality, efficiency and competitiveness of private enterprises, additionally saying that the formation and development of private economic groups with strong potential and ability to compete in overseas and domestic markets is encouraged.

The third orientation is to strongly restructure production and services and rapidly increase domestic value, added value and competitiveness of products, enterprises and the economy.

Economic restructuring will further stick to the direction of industrialization and modernization. Within each sector, sub-sectors, products or production stages using low technology with low productivity and low added value will shift one by one to use clean and environment-friendly technology with high productivity and added value.

The country will capitalize on the advantages of its tropical agriculture, build and develop large zones of specialized cultivation in the forms of farms and hi-tech agricultural areas meeting popular international standards on food safety and hygiene. Agricultural production will be linked with processing, preservation, export and consumption of products, and with the global value chain with regard to products that are highly competitive in the world market such as coffee, rubber, rice, catfish, shrimp, pepper, cashew nuts, other seafood, tropical vegetables and fruits. For products and product groups with high domestic demand but medium competitiveness such as animal husbandry products and sugar their production scope and diverse production methods will be maintained in conformity with actual conditions of each region.

Industrial production will be restructured in terms of sector, region and new value to increase the content of science and technology as well as proportion of local value in products. Processing and assembly activities will be strongly shifted to manufacturing and fashioning. Connection to the global manufacturing network and value supply chain will be promoted for sectors and products with competitive edge such as food and foodstuff processing, seafood, beverage, garment, leather footware and leather products. Efforts will be concentrated on developing prioritized and supporting industries such as petrochemical, electronics and information technology, metallurgy, mechanical engineering, green industries and renewable energy, manufacture of car accessories, agricultural machines in order to improve and upgrade the development level of the economy.

In addition to diversifying types of services and raising the development level of services, according to the master plan, Vietnam will focus on the development of service sectors and products with competitive edge such as trade, construction, hotel, restaurant, tourist, telecommunications, financial-banking, logistics, education and training, medical care, and agricultural production services. At the same time, it will build a number of tourist service centers with high quality tourist products with trademarks, strong national identity and competitiveness at regional and international levels.

The fourth orientation is to further rationally restructure, build and develop economic regions.

The master plan states that production and service sectors will be rationally redistributed on the basis of promoting the potential and advantages of each region under a long-term vision, forming different economic structures among localities and regions.

Coordination and connection among localities within a region and among regions will be strengthened for mutual development and putting an end to overlapping and uncoordinated investments among localities.

Key economic regions will be further developed to create a motive force to push and spread development to localities within each region and to other regions and to the entire economy. Resources will be mobilized for developing a number of selected economic zones and industrial zones to form strong marine economic centers.

For implementing the master plan, the Prime Minister asks ministers, heads of ministerial-level agencies and government-attached agencies and chairpersons of provincial-level People’s Committees to urgently elaborate and implement right in the first half of 2013 specific restructuring programs for the fields, sectors or localities under their management.-


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