Vietnam's effort in economic restructuring leaves much to be desired in four main pillars, including reforms on state sector, public investment, credit institutions and stock market, according to the Central Institute for Economic Management (CIEM).
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More importantly, the shift of economic activities away from agriculture toward services and manufacturing, from rural to urban areas, or state sector to public sector was slower than expected, Cung said.
Vietnam's manufacturing and processing sector has been growing strongly, however, local manufacturers only take part at the lower end of the global value chain, thus contributing modeslty to economic growth.
Nguyen Thuy Hien, deputy director of the Ministry of Industry and Trade's Planning Department, pointed to the lack of breakthroughs in Vietnam's industrial sector. One of the major issues was the slow progress in reforming public investment as regular budget spending remains over 65% of total expenditure, nearly double ASEAN's average rate of 35%.
Moreover, expenditure for development investment has not met up to demands.
"Excluding revenue from land use rights, total revenue from domestic taxes and fees are at moderate level," stated Vu Sy Cuong from the Academy of Finance.
Overall, Vietnam's state budget expenditures (as per GDP) are much higher than those of low-income countries, according to the International Monetary Fund (IMF).
There have not been proper measures to improve efficiencies in public investment and avoid waste, Cuong added.
Another issue was potential risks of bad debts in the banking system, accounting for 7% of total credit by the end of 2017. As of August 28, the rate stood at 6.8% as informed by the State Bank of Vietnam (SBV).
During the 2016 - 2020 period, Vietnam sets the average GDP growth rate of 6.5 - 6.7%, while reducing state budget deficit to below 3.5% of GDP by 2020. Additionally, public debt in the period must not exceed 65% of GDP, government debt less than 54% and foreign debt under 50%.
Moreover, the average annual growth rate of productivity is estimated to be over 5.5%. By 2020, workforce in the agricultural sector would be reduced to below 40% of the total.
With regard to the finance and banking sector, the bad debt ratio in credit institutions is set to remain below 3% by 2020, and market capitalization of the equity market at 70% GDP.
More substantial changes required
The head of CIEM stressed the necessity of having more substantial changes in economic restructuring in the 2018 - 2020 period, while efforts should be made to identify new growth engines.
Cung proposed budget discipline, more efficiency government spending, and greater transparency in a bid to reduce regular spending. Meanwhile, investments in infrastructures have to focus on priority fields holding high importance to the economy.
Additionally, modernizing the process of master planning, restructuring economic zone towards higher productivity, efficiency and quality should be priority, he continued.
"For an additional increase by every one percentage point in GDP of Hanoi and Ho Chi Minh, the overall GDP will increase by 0.5 percentage points, as the two cities contribute 50% to Vietnam's GDP," Cung said.
Besides, the government should be more supportive in developing the private sector and having efficient strategies in attracting foreign investment capital, according to Cung.
Banking expert Can Van Luc cited a report of an international organization listing a number challenges to Vietnam, including bureaucracy, corruption, lack of transparency, policy inconsistency, inappropriate infrastructure and low productivity.
Luc stated the remaining three years in the 2016 - 2020 period would be a turning point for Vietnam in transforming the economic growth model from a focus on quantity to quality.
Meanwhile, Vietnam should apply market mechanism to all aspects of the economy, ensuring fair competition for economic participants. "Without competition there will be no development in field of science and technology," Luc stated.
