News Room - Business/Economics

Posted on 08 Jun 2009

Vietnamese economy showing signs of recovery: World Bank

            

The Vietnamese economy is showing signs of recovery after a “considerable” slowdown in growth last quarter, helped by construction and higher commodity prices, the World Bank said Monday.

 

Gross domestic product expanded 3.1 percent in the first quarter from a year earlier, according to the General Statistics Office in Hanoi. The previous weakest expansion was 3.8 percent in the first quarter of 1999, the first year for which quarterly figures are available.

 

“The news is not all bleak,” Victoria Kwakwa, the Hanoi-based country director for the World Bank, said at a conference in Ho Chi Minh City. “The construction sector seems to be picking up. Globally, commodity prices are picking up and this should also help.”

 

Prime Minister Nguyen Tan Dung had said in April the government plans to spend about US$8 billion in stimulus spending to support the economy, which has been hurt by the worst world recession since the Great Depression. The government’s 5 percent 2009 growth target is “very challenging” given the global environment, Minister of Planning and Investment Vo Hong Phuc said Monday.

 

A “strong and quick” government response to the slowdown through stimulus spending has contributed to the nation’s recovery, Kwakwa said. Vietnam’s economy has been resilient and the last two months have seen an improvement, she said at the Vietnam Business Forum, which is held twice a year to give companies an opportunity to raise issues with the government.

 

Stimulus spending may boost Vietnam’s fiscal deficit to as much as 9.8 percent of GDP, the Asian Development Bank said in April. The government’s measures to support the economy include subsidizing loans to companies.

 

‘Visible upturn’

 

The reopening of credit lines in Vietnam has resulted in a “visible upturn in construction activity,” the UK-listed Vietnam Property Fund Ltd. said last month. A recent improvement in steel and machinery imports points to increased infrastructure spending, according to Dragon Capital, which manages the fund.

 

“The nation’s economy has started to pick up from April, and in May,” Phuc said. “The industrial sector is recording significant growth.”

 

Still, some Vietnamese companies have been “severely affected” by the slowdown, and foreign investment commitments have declined, Kwakwa said. The government must ensure that no macroeconomic “difficulties” result from stimulus spending, she said.

 

“It will be important to monitor the macroeconomic effect and to adjust its implementation as needed,” Kwakwa said.

 

Minister Phuc said the government is open to suggestions and ideas from the business community and willing to amend regulations to remove difficulties and further facilitate investors.

 

Bottlenecks

 

The government would focus on improving regulations to attract more investors in developing human resources and infrastructure, which are the country’s major “bottlenecks,” Phuc said at the conference.

 

Thomas R. Siebert, chairman of the American Chamber of Commerce, said the chamber has voiced concerns about infrastructure deficiencies and inadequate logistics in Vietnam for years.

 

The deficiencies and delays in the development of key infrastructure, including roads, bridges, power plants and seaports have hampered the country’s manufacturing and export sectors, he said.

 

Siebert called on the government to facilitate private investors in developing, funding and managing infrastructure.

 

Brian O’ Reilly, a board member of the Australian Chamber of Commerce, said the standards for education and training in Vietnam were inadequate.

 

He cited a recent survey by the World Bank which found 60 percent of vocational school graduates needed retraining on the job.

 

Employers have complained about the education system which leaves graduates lacking necessary practical and technical skills, he said.

 

The government should seek closer engagement with the business community to ensure that education and training services are designed to meet the needs of its economy, said Reilly.

 

He said the business and regulatory environment should be designed in a way that encourages foreign investors to deliver education and training services in Vietnam.