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Report frankly points out Vietnam macro-economic issues

2013-11-25 11:56:37

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Vietnam fails to prove it can join the global value chain when the manufacturing sector posts a trade deficit.

 

Content

 

The macro-economy of Vietnam in 2013 is still challenged by myriad issues including the heavy burden of fees and taxes and the many bad debts caused by state-run enterprises, an advisory group for macro-economic policies remarked in their report released Thursday.

 

While recognizing several achievements made in 2012 such as decreased inflation and trade surplus, the group, consisting of members of the National Assembly Economic Committee, said Vietnam still fails to prove it can join the global value chain when the manufacturing sector posts a trade deficit.

 

Vietnam enjoyed an export bonanza in 2012, but this was mostly due to Samsung, whose manufacturing plant in northern Bac Ninh Province exported a huge number of mobile phones and devices.

 

Still, Vietnam raked in modest value-added from these exports since its role in the production was assembling the spare parts produced by or imported from South Korea, home to the electronics giant.

 

South Korea has thus become the second largest market where Vietnam has suffered a trade deficit. The country imported some US$10 billion worth of imports from South Korea last year, the report shows.

 

Meanwhile, Vietnamese exports to several traditional markets such as the EU, the US, and Japan remain on the rise, but this is not good news either.

 

“This can be explained by the fact that Vietnamese products belong to the low-value segment, which can meet normal demand at these markets. In the meantime, China has given up on this segment to switch to those with much higher value,” the report states.

 

Loss-making state companies

 

The report also points out that the state-owned enterprises (SOE) have caused a considerable amount of bad debts for the credit system.

 

As many as 30 out of 85 state corporations and groups currently have a debt-to-equity ratio larger than 3, which is the safe limit.

 

Remarkably, seven SOEs have a ratio that is larger than 10.

 

Total loans of the 12 state economic groups amount to nearly VND218.74 trillion, or US$10.32 billion. Many SOE giants are in the list of debtors: PetroVietnam, with an outstanding debt of VND72.3 trillion, EVN, with VND62.8 trillion, and Vinacomin, with VND19.6 trillion.

 

Data from the National Committee for Financial Supervision shows that the total nonperforming loans owed by the SOEs as of the end of last year accounted for 11.82 percent of the total figures recorded at credit institutions under the national system.

 

Based on this data, researchers said that the total bad debts of the SOEs amount to some VND24.95 trillion. This does not include the VND19.8 trillion bad debts Vinashin owed local credit institutions in 2010.

 

Reducing the number of SOEs

 

The report also says that the budget collection and public spending of the Vietnamese government is also higher than other countries.

 

“The burden of taxes plus other difficulties in the business environment have left negative impacts on business activities,” the report states.

 

Businesses in Vietnam have to complete tax-paying procedures 32 times per year, and spend a total of 872 hours a year only to complete tax paperwork, the report states, citing data from the World Bank’s 2013 Business Environment Report.

 

The report recommends that the number of state companies should be cut to boost the SOE restructuring process.

 

The country should also reduce taxes and fees and ensure that businesses will be able to predict the bank interest rate fluctuation to plan their business strategies.

 

The government should also cut public spending, while the SOEs should take a narrower role in the national economy, such as only providing special and important services, the report says.

 

Source: tuoitrenews