Viet­nam’s new govt to con­tinue eco­nomic re­forms

The Pak Banker - - BUSINESS -

Viet­nam wants to re­as­sure in­vestors that new lead­ers cho­sen last week by Com­mu­nist of­fi­cials at its party congress will press ahead with eco­nomic re­forms as pol­icy mak­ers aim to boost growth to the fastest pace in nine years.

Pol­icy mak­ers will con­tinue "refining and mod­ern­iz­ing the fi­nan­cial and bank­ing sec­tor," fur­ther pri­va­tize sta­te­owned com­pa­nies and upgrade its in­fra­struc­ture, said Deputy For­eign Min­is­ter Le Hoai Trung, who was re-elected last week to the pow­er­ful cen­tral com­mit­tee of top 200 Com­mu­nist of­fi­cials who will over­see the party's affairs.

"The mes­sage is that we will con­tinue with our eco­nomic re­forms even though we know there are chal­lenges," Trung said Jan. 28 at the close of the party meet­ing that takes place ev­ery five years to chart the coun­try's di­rec­tion. "The re­forms have brought about his­toric and sig­nif­i­cant re­sults, so we would go for­ward with it. It's also the wish of the pub­lic."

Viet­nam's Com­mu­nist party of­fi­cials gath­ered last week to choose a new slate of lead­ers who will lead the coun­try un­til 2020 and set a growth path that avoids a re­peat of past mis­takes, in­clud­ing soar­ing credit growth that sad­dled banks with bad debt and pref­er­en­tial treat­ment of state compa- nies that cre­ated in­ef­fi­cien­cies. Gen­eral Sec­re­tary Nguyen Phu Trong was re-elected to the po­si­tion for a se­cond term while Deputy Prime Min­is­ter Nguyen Xuan Phuc was nom­i­nated to re­place premier Nguyen Tan Dung when his term ends in July, rais­ing ques­tions whether the political tran­si­tion will slow the pace of re­forms.

"Viet­nam op­er­ates un­der a con­sen­sus-based de­ci­sion-mak­ing frame­work, and there­fore changes in per­son­nel will not im­me­di­ately al­ter the pol­icy tra­jec­tory," An­drew Fen­nell, Hong Kong-based as­so­ciate di­rec­tor of Asia Pa­cific sov­er­eign rat­ings at Fitch Rat­ings wrote in a re­search note re­leased to­day. Viet­nam's com­mit­ment to a struc­tural re­form-ori­ented pol­icy in­clud­ing a fo­cus on macro sta­bil­ity and mar­ket lib­er­al­iza­tion will re­main im­por­tant fac­tors for the coun­try's macro out­look, ac­cord­ing to Fen­nell.

Still, the new lead­er­ship will prob­a­bly shun bold ini­tia­tives and may slow re­forms needed to meet the con­di­tions of the Trans-Pa­cific Part­ner­ship trade pact, such as al­low­ing for in­de­pen­dent la­bor unions, said Tuong Vu, an as­so­ciate pro­fes­sor of political sci­ence at the Univer­sity of Ore­gon. "They want sta­bil­ity for regime se­cu­rity," said Vu. "That does not cre­ate an open en­vi­ron­ment for more re­forms or faster re­forms. The new lead­er­ship is go­ing to tell peo­ple to keep be­liev­ing in the party."

Viet­nam is fore­cast to ex­pand at 6.7 per­cent this year and to be among the world's fastest-grow­ing economies, as ris­ing lo­cal de­mand and surg­ing for­eign di­rect in­vest­ment are help­ing the na­tion counter global threats that's sparked a wave of stock sell­ing and cur­rency de­pre­ci­a­tion. A cloud over the coun­try's eco­nomic pic­ture is a trade deficit, widen­ing pub­lic debt, and the govern­ment's fail­ure to meet its goal to pri­va­tize 289 state com­pa­nies last year. Dur­ing the congress, sev­eral lead­ers in­clud­ing Trong, ex­pressed con­cerns that Viet­nam is at risk of fall­ing be­hind re­gional peers.

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