MEASURES THAT MATTER

Policy adjustments are needed to solidify Vietnam’s resilience and sustain its role as a growth beacon both regionally and globally.

There is a general expectation of positive economic conditions globally within most 2024 outlooks. Growth forecasts for the year are, however, lower than for 2023 in many countries. Vietnam, meanwhile, has set a higher GDP growth target for the year, of 6-6.5 per cent, but significant effort will be required for it to deviate from the global trajectory. With new opportunities emerging, relying solely on the global economy and exports is no viable way forward.

Opinions offered at the 16th Vietnam Economic Scenario Forum, co-organized by Vietnam Economic Times (VET) / VnEconomy and the Ministry of Foreign Affairs in Hanoi on January 11, revealed a common view that Vietnam must tap into its internal strengths. Its focus must be on transforming this internal strength into a growth catalyst, taking action to seize opportunities in green and digital transformations as they unfold. Special attention should be given to the “friendshoring” trend as a key element for bringing about a fundamental shift in the economic structure.

INNER STRENGTH

Mr. Phan Duc Hieu, Standing Member of the National Assembly’s Economic Committee, underscored four key policy highlights that demonstrate the firm resolve of the government and the National Assembly to drive economic growth this year.

Firstly, regarding the strategic direction for fostering socio-economic development in 2024, both National Assembly and government resolutions underscore the paramount importance of prioritizing macroeconomic growth and stability. Mr. Hieu pointed out that there are clusters of solutions aimed at promoting a green and sustainable economy. “The innovative aspect lies in the driving forces for green and sustainable development, necessitating a focused allocation of credit to priority sectors for green transformation and sustainable progress,” he told the Forum.

In regard to institutional improvements, the resolutions emphasize energy security and the promotion of an energy

transition. “Explicitly stated in the National Assembly resolution is the requirement for the government to promptly develop solutions for prioritizing investment attraction and accelerating green projects, with a special emphasis on electricity transmission and distribution to ensure a reliable power supply,” he said.

Secondly, the resolutions highlight strategies to leverage the substantial success from economic diplomacy. Two categories of solutions were highlighted: the ongoing advancement of the manufacturing and processing industry and the development of human resources. “Resolution No. 103 emphasizes concentrating on training and specifies targets, such as the imperative of training 50-100,000 workers for the chip and semiconductor industry, in order to capitalize on new opportunities arising from achievements in economic diplomacy,” he explained.

The third policy highlight is the strong emphasis placed on FDI attraction. It is notable that the National Assembly has approved a resolution addressing corporate income tax supplements in accordance with Global Minimum Tax regulations, concurrently instructing the government to promptly establish a fund from this supplementary tax collection to support investments.

Finally, and of equal significance for the successful implementation of measures outlined, is policy directed towards the business community. As highlighted by Mr. Hieu, the National Assembly’s resolution places considerable focus on the execution of Politburo Resolution No. 41. This resolution seeks to boost the motivation of the business community, which is considered a key player in implementing strategic solutions. It also underscores the necessity for the prompt and unwavering implementation of Resolution No. 41 to cultivate motivation and ensure a secure and sustainable investment environment for the business community.

Discussing economic diplomacy further, Mr. Pham Quang Vinh, former Deputy Minister of Foreign Affairs, told VET that given the global economic shifts influenced by geopolitical issues and escalating conflict and tensions, Vietnam’s external relations in 2023, 2024, and subsequent years, particularly in economic diplomacy, will benefit from achievements in 2023.

Firstly, aligning with domestic accomplishments, especially in pandemic control and the recovery of socio-economic activities, there has been a simultaneous push for diplomatic activities to re-establish relationships and cooperative environments. This is crucial, particularly in reestablishing broken supply chains, considering the difficulties faced by Vietnam’s major export markets, partners, and investors. Achieving total trade value of $683 billion and attracting $36.6 billion in FDI in 2023, though still short of prepandemic levels, represents a commendable effort by the country. GDP growth of 5.05 per cent also contributes to the positive narrative.

Secondly, Vietnam’s foreign affairs sector, along with other sectors, diligently executed the government’s determination to prioritize the economy in 2023. All activities at every level focused on economic exploitation. Vietnam hosted nearly 50 high-level delegations from various countries last year, resulting in significant economic agreements.

The country has also proactively embraced transformative global trends, such as digitization and sustainability. While the effectiveness of these endeavors remains unclear, Vietnam has actively pursued green infrastructure and quality facilities and engaged in economic initiatives beyond existing FTAs. This includes involvement in frameworks such as the Indian Ocean - Pacific Economic Framework, the Just Energy Transition Partnership (JETP), cooperation with the US in technology transfer, and commitments from COP26 to COP28 on emissions reductions. “These efforts have generated new resources for investment and development in Vietnam, providing evidence of the country’s move towards a positive transformation,” Mr. Vinh said.

SUPPORTING MONETARY POLICY

As per figures released by the General Statistics Office (GSO), Vietnam recorded notable GDP growth of 6.7 per cent in the fourth quarter of 2023. This was its highest quarterly expansion since 2019, contributing to annual GDP growth of 5.05 per cent. Despite falling short of the 6.5 per cent target set by the government and the National Assembly, Vietnam stood out globally for maintaining a commendable growth trajectory. To meet its GDP growth target of 6-6.5 per cent for this year and to secure financial backing to support economic development, in accordance with governmental resolutions, the State Bank of Vietnam (SBV) is set to introduce a banking sector action plan for 2024. The plan will concentrate on key aspects of monetary policy management, according to Ms. Bui Thuy Hang, Deputy Director General of the SBV’s Monetary Policy Department.

The central bank will diligently monitor macro-economic and monetary trends, along with key economic indicators such as inflation. This proactive and flexible approach in managing monetary policy tools is aimed at supporting economic growth while simultaneously ensuring control over inflation and sustaining overall macro-economic stability.

It also plans to tailor interest rates in

Explicitly stated in the National Assembly resolution is the requirement for the government to promptly develop solutions for prioritizing investment attraction and accelerating green projects, with a special emphasis on electricity transmission and distribution to ensure a reliable power supply.”

Mr. Phan Duc Hieu Standing Member of the National Assembly’s Economic Committee

response to market dynamics, and will encourage financial institutions to optimize cost-saving measures. The promotion of digital transformation in the credit approval process will be prioritized, streamlining lending procedures and cutting costs. This collective effort is anticipated to further drive lending rates downwards.

“The SBV promptly established a 15 per cent credit growth target from the outset of this year,” Ms. Hang went on. “This target is adaptably fine-tuned to align with market dynamics. We also continuously encourage credit institutions to prioritize lending to productive sectors that contribute to economic growth, and to extend consumer credit, thereby curbing informal lending.”

Yet another imperative is to maintain exchange rate stability, meet the legitimate demand for foreign currencies, and ensure the seamless conduct of foreign exchange transactions.

LINGERING STRUGGLES

With extensive new prospects and wellsuited policies, businesses are currently benefiting from substantial support and exploring growth avenues. However, they still face challenges relating to policy mechanisms, requiring resolution and practical guidance to maximize their internal capabilities for substantial contributions to overall growth.

According to Mr. Dau Anh Tuan, Deputy Secretary-General and Director of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI), 2023 proved to be an exceptionally challenging year for both businesses and the economy, especially in the private sector. Despite a record number of new enterprises registrations, at 159,294, up 7.2 per cent against 2022, the year also saw a record number of businesses closing their doors, alongside sluggish credit growth and declining exports, affecting sectors dominated by private enterprises.

Hence, entering 2024, Mr. Tuan emphasized a key direction for both the National Assembly and the government: addressing this challenge to ease the situation for businesses. “I don’t like the term ‘solving difficulties’, because that means we are constantly chasing after challenges, and the proactive role and leadership of the State are greatly reduced,” he said, suggesting a shift in perspective from “solving difficulties” to “creating favorable conditions” and advocating for a more supportive approach to business activities at various levels.

In light of market challenges, he also highlighted the importance of cutting business costs. Despite the temporary reduction of VAT rates to 8 per cent being extended to mid-2024, there is a need for comprehensive measures to effectively reduce overall expenses. Cutting administrative and unnecessary inspection costs also remain crucial in supporting recovery in the immediate future.

Mr. Tuan also touched on Vietnam being an exceptionally attractive destination, having fostered sound relations with Europe, the US, and China, alongside successful cooperation with Russia, Ukraine, Israel, and Palestine. This strategic positioning necessitates proactive exploitation of subsequent market opportunities. To capitalize on these, he advised the government and authorities to significantly improve the quality of implementation, which will be a crucial factor in 2024 and beyond. ◼