Asia Briefing: Vietnam struggles to grow even as its exports rise
H anoi, capital of Vietnam, for years was one of the economic success stories of Asia, but lately it has been struggling to deal with sluggish economic growth, while at the same time tackling corruption and bad debt.
Gross domestic product (GDP) in the second quarter to the end of June rose
5 per cent from the same period last year, slightly faster than in the first quarter, and the government is forecasting 5.5 per cent growth in the full year.
That would be the first time the economy has expanded less than 6 per cent for three straight years since 1988, according to International Monetary Fund data. “Production and business in the country are still facing difficulties, domestic market demand remains weak,” the General Statistics Office said in a report.
Bad debt also weighed on the economy – the central bank estimated bad debt at 7.8 per cent of outstanding loans at the end of last year.
There is also pressure to force state-owned companies to become more efficient, and deal with a flood of bankruptcies, as well as slow retail and credit growth.
Prime minister Nguyen Tan Dung last month ordered state agencies to start working on 2014 economic targets, and the country will strive for growth of 6 per cent next year.
He also issued a personal apology to the National Assembly for mismanagement of the economy, the Financial Times reported, which is the second time in the past few months he has had to say sorry, after he apologised in November for his handling of Vietnam Shipbuilding Industry Group, or Vinashin, the state-run firm he championed and that almost collapsed under €3 billion of debt that year.
Against this background of growing public unhappiness about failure to rein in corruption and dissatisfaction with Mr Dung’s administration, the government is working on various options to get the economy moving.
Earlier this month, the Hanoi stock exchange said it planned to introduce new bond instruments, such as futures, related indexes and cross-currency repurchase agreements to boost trading in the market, and this news came as the government ramped up debt sales to a record this year.
The Hanoi Stock Exchange has consulted with experts on the plans and will submit a proposal to the ministry of finance for implementation in 2014, deputy general director Nguyen Thi Hoang Lan said in an interview with Bloomberg.
The bourse is now “deeply studying” the feasibility of the plans and the submission will be done as early as the end of the year, she said.