TPP will not come as expected. Agriculture – leveraging salvage for the entire economy of Vietnam – has not promoted potential internal forces and strengths. But, Vietnam’s economic prospects are forecast to be relatively bright in 2017. These optimistic opinions are shared by economist Bui Kien Thanh with reporter of Vietnam Business Forum. Anh Phuong reports.
What do you think about Vietnam’s economic development prospects in 2017?
In my opinion, forecast and assessment need to be very cautious and careful, particularly in the current context of volatile domestic and global economies. The Vietnamese economy will face challenges but I believe that it will thrive.
Some of those challenges are noticeable while others are latent. The most noticeable one is that Vietnam has to confront extremities of climate change which give rise to natural disasters and environmental disasters. Public debts grow up rapidly, and financial and interbank markets still have many bottlenecks needed to be cleared. The leverage of Vietnam’s economic growth – the foreign direct investment (FDI) sector – is unsustainable, relying too heavily on foreign partners while having yet to seek out development path for Vietnam to achieve the highest efficiency. TPP deadlock will have certain impacts on Vietnam’s economy if we do not have appropriate response strategies.
From a more optimistic perspective, Vietnam’s economic growth will grow to a certain extent in 2017. The country’s gross domestic product (GDP) is likely to expand 6.7 per cent in 2017 thanks to institutional reform, better investment environment, new incentives for the private sector to develop to become the main driving force in 2017, as well as recovered prices of energy and agricultural products. Some “star” economic sectors such as agriculture, real estate, private sector and logistics will have stunning development breakthroughs to contribute to overall macroeconomic development.
What is your outlook, if Vietnam actually cannot access the TPP in the coming time?
Under the administration of President-elect Donald Trump, the US may withdraw from the TPP. However, some estimated that the Donald Trump administration will negotiate it later to take more advantage for the US.
But, the biggest challenge for a new government, an enabling government of Vietnam is short and medium term challenges. As for TPP, we need to understand that if the TPP comes true, Vietnam’s export markets will be expanded, particularly to the US – its key and potential export market. Nevertheless, if the TPP is indeed cancelled, Vietnam still has other potential customers such as the ASEAN Economic Community (AEC), Japan, South Korea and China. As for China, if there is no TPP, Vietnam still have many partnerships such as Regional Comprehensive Economic Partnership (RCEP) backed by China.
In Vietnam, agriculture has not been fully tapped. What do you think about this backbone economic sector?
2016 was a memorable year for Vietnam’s economy and politics as key leadership positions were changed. Meanwhile, global economic changes are both supportive and unsupportive to Vietnam.
Vietnam’s agricultural sector is not immune to external challenges. However, in reality, we must acknowledge that agriculture is a big contributor to Vietnam’s gross domestic product (GDP), estimated at 16-17 per cent in 2016. This considerable high rate proves the importance of Vietnam’s typical economic sector. Mr Nguyen Xuan Cuong, Minister of Agriculture and Rural Development, said there were three bright spots of the agricultural sector in 2016: Recovered growth from the slump in the first half (down 1.2 per cent), record export value of US$32.1 billion – up more than 6 per cent from 2015, and food safety. The sector expects to expand 2.5-2.8 per cent and earn US$32-32.5 billion of export revenues in 2017
In my opinion, we need to underline agricultural visions because Vietnam has been an agricultural country from ancient times until now. Particularly in the context of the fourth industrial revolution, the agricultural sector must have groundbreaking directions and research. In fact, arable soil account for a small ratio while the area of forests and mountains makes up a majority. Hence, agricultural development must be more inclusive. Apart from rice cultivation, we need to develop forestry and fishery.
Vietnam’s agricultural sector must have radical solutions to combat clandestinely harmful agents caused by extreme climate change. Advancing extensive integration, exporting refined products, building a smart agriculture, and applying science and technology are what agriculture needs to do.
In 2016, we had many new billionaires. Their success and fortunes came from real estate business. Do you think the real estate sector is a bright investment channel of the Vietnamese economy in 2017?
As far as I am concerned, the real estate market advanced considerably 2016 thanks to new supports. Specifically, the legal framework for this market is more supporting. The clearest evidence was Circular 05 in place of Circular 36, which tightened credit flows into the real estate market. Accordingly, the risk ratio of property credit was increased from 150 per cent to 250 per cent and the ratio of short and medium-term loans was reduced from 60 per cent to 40 per cent. Real estate business activity expanded 99.1 per cent in corporate entities and 242.5 per cent in registered capital. In 2016, real estate prices grew up 5 – 7 per cent in the primary market and 10 – 15 per cent in the secondary market.
Deals also picked up in the second half of 2016. The absorption rate of apartments reached nearly 80 per cent – the highest since 2011. In the third quarter alone, a total of 5,273 apartment units were sold, up 52 per cent from the previous quarter.
The property market progressed steadily in 2016. All segments witnessed robust growth, particularly premium class and vacation property. Many property investors have become billionaires in the year.
What do you think about impacts of emerging economic sectors on the Vietnamese economy in 2017?
Power supply, traffic and medical infrastructure need to be developed in any country. The Vietnamese economy needs to invest for logistics service development in the coming time.
An example was the recall of Samsung Galaxy Note 7 smartphone. Expensive phones are usually shipped by air because they are hot trendy products. But, due to objective reasons, this smartphone is not allowed to board the airplane, thus upsetting Samsung supply chains. And, the Vietnamese logistics sector must find out an optimal alternative. This is a great premise for the Vietnamese logistics industry to develop because we all know that logistics contracts usually have big value. Moreover, this sector also fills the gap between producers and consumers.
Thus, what should a new enabling government need to do to operate the economy and obtain best results in 2017?
I want to stress “operational discipline” in the financial and banking sector. This is considered the lifeblood of the whole economy. It is vital to prevent the collapse of the banking system, clear the growth of blood clot of bad debt in the banking and financial sector. Bad actions may result in the collapse of other sensitive areas such as inflation, public debt, exchange rate, gold and US dollar.
The agricultural sector cannot blame environmental disasters while it makes light of scientific and technological application and FDI attraction. As it holds enormous resources such as land and labour resources, it must stay ready to respond to multifaceted changes from the world.
Real estate will of course earn huge profits. However, it is necessary to take into account the necessity for sustainable development, construction environmental protection, ecosystem, and landscape protection. In addition to investing in deluxe vacation property, Vietnam should also spare investment resources for social projects to provide easier access to housing to citizen.