New Hope For Vietnam's Economy In 2015
As of the end of 2014, common assessments of our economy acknowledged success, as inflation was restrained and GDP growth was beyond our expectation… Many optimistic views have been raised about prosperity in 2015. What is your opinion about this?
Depending on who look at, and the way of evaluating the numbers, from mid-2009 to 2014 our economy had to go through uneven development and stagnant periods due to deformities of macro policies, which caused micro areas to suffer from hardships and stagnate.
Regarding the thriving economy in 2015, I have the same feeling as many others. However, to prevent complacency and deluding ourselves, we should look at the "cause and effect" of the issue.
If we think that inflation was restrained and GDP growth was beyond our expectation, these successes are the result of hard winning efforts to repair wrongdoings in the implementation of macro policies in the past. This is a reality.
What is your acknowledgement on what is considered as breakthrough results in 2014 that can become a driving force for 2015?
One of the major changes was the nationalisation of the Viet Nam Construction Bank (VNCB) in early February 2015. If we count it in accordance with the lunar calendar, it is a breakthrough event in 2014. If we count it in accordance with the solar calendar, it's a driving force for the year 2015 and will be for many years after that.
The reason is that from 2003 to 2008, banking systems, especially joint stock commercial banks, were under loose management and they became excessively negligent. "Zombie banks" were nourished until the 2010-14 period.
The consequence of allowing a small "zombie bank" to turn into big "zombie bank", such as VNCB, should have been predictable. We all know the impact of this incident on the economy. Therefore, it's necessary and imperative to tidy up and restructure the banking system.
For me, this is an impressive "against the current" decision and bold move of the governor and State Bank of Viet Nam (SBV), despite some disagreements with a number of monetary and management policies of the State Bank of Viet Nam in recent years.
Some of my colleagues in the fields of banking and finance might not agree with my remarks, but this is what I have been waiting for over the past four years.
Up until now, the domestic demand factor, which was considered "hollow" in 2014, has not been improved. In your opinion, what are the reasons for this issue and is it a main obstacle to economic development?
It's true. In my observation, experts and policy executors often misunderstand or hesitate to admit these hollows, which include weak and indecisive private investment in many fields, and lacking of positive signs from consumer expenditures.
Back to the above mentioned "cause and effect", these hollows result from wounds caused by people's faith in inconsistent and indecisive policies and management at the macro level.
As such, it's a must that definitive decisions, such as the takeover of VNCB of SBV, be declared more clearly and they should be expanded to other ministries to create optimism and a thriving economy. It is necessary to find, strengthen and restore confidence to our economy, especially among investors and consumers, even if it is too delicate.
What is the driving force to push domestic demand in 2015?
Priority should be given to solutions and methods that aim to settle bad debts in the economy, but they should be practical and absolute.
Although I haven't had the opportunity to access official data and detail the case leading to the last solution to VNCB, I think we might have another solution. Bad debt is bad debt. Fake debt is fake debt. We have to separate these two debts and if we can do it, the "hollows" will not exist.
It has been three years since the implementation of economic restructuring which focused on State-owned enterprises (SOEs), public investment and banking sectors. Of the three sectors, which one achieved the most satisfactory results, in your opinion? Which sector needs to be concentrated upon in the year 2015 to create a breakthrough?
Firstly, the banking sector has been restructured. It has brought about major changes and other steps are to be carried out in SBV's plan of actions.
Secondly, some remarkable moves in State-owned enterprise sectors should be mentioned, such as equitisations of joint stock commercial banks, and Vietnam Airlines.
Lastly, it's very difficult to deliberate the results of the public investment due to interaction between the Central government and localities.
The banking sector should be focused on restructuring and plans of actions should be consistent to gain stability and development in 2016. At the same time, SOEs equitisation should be sped up.
Low interest rates are a good opportunity for the business community. However, not many enterprises have access to capital in 2014. In your viewpoint, what are the reasons? Which policies are necessary to help enterprises access more sources of capital?
Of the objective reason, first of all, is the low interest rate, compared with 2010-2013, which is a side of credit and a source of capital. Secondly is the capital market, in general, and deposit market, in particular, for our economy is too weak.
They don't provide or support for mid and long-term sources. Finally, the main issue about bad debt is fumbling about in the banking system and Vietnam Asset Management Company, which we haven't addressed thoroughly, as I mentioned earlier.
On the subjective reasons, most banks are accustomed to and based upon collateral assets and guarantees for credits, when dealing with newly invested or upgraded projects. They are not flexible and professional enough to carry special knowledge, such as sponsoring projects without collateral or having multi-layer sponsors with different sources of capital.
It is hoped that from the year 2015 we will have more banks that work in a more professional way and change their approach in assessing and providing credit, as well as capital, for projects.
In other words, banks should evaluate whether a project is good and feasible, rather than only looking at its assets or guarantees. In short, the banking sector needs a generation of specialists and management experts who have higher professional skills.