Interview: ADB official urges Vietnam to focus on growth trend, not figure itself

Eric Sidgwick, Asian Development Bank Country Director for Vietnam, has called on Vietnam to focus on its growth trend instead of only on figures.

"How much the growth rate is in a year is important, but the trend of growth rate is more important," Sidgwick said in a recent interview with Xinhua.

In discussions about how much the Vietnamese economy will expand this year and the fact that it remains a hot topic in the country, the official said that it is more important to define underlying factors that allow or encourage the growth trend as well as what factors prohibit the trend from being sustained.

Previously, the Vietnamese government had forecast the country's gross domestic product (GDP) to reach 6.7 percent in 2016. However, the yearly estimated growth was lowered to between 6.3-6.5 percent in early October.

According to the ADB official, the lowered goal is still "unlikely" to be realized.

"So far this year, the drought in Vietnam's Central Highlands and Mekong Delta region has reduced agricultural output. At the same time, the mining sector's output has reduced largely by a decrease in the production of coal."

"These two factors have been active in reducing Vietnam's economic growth rate," said Sidgwick, adding that "Now we expect the growth rate for Vietnam this year will be around 6 percent."

The World Bank, for its part, meanwhile, has just maintained its forecast for Vietnamese economic growth at six percent for 2016.

"Until the end of September, the growth was under 6 percent. So having the annual growth rate at 6.3-6.5 percent means the growth in the last quarter must be very high, at over 7 percent," the economist explained.

"So far, we don't have leading indicator yet," added Sidgwick.

Explaining that the underlying point is not the actual growth rate itself in 2016 or even in 2017, the expert said that the more important factor is how to ensure growth in a sustainable way every year and that growth is shared by more and more people who contribute to the rate.

"The critical issue for Vietnam is how to sustain a high rate of growth. The country has many things to do with the businesses of infrastructure, environment, human skills, capital and access for finance, among others," noted Sidgwick.

According to the ADB official, the Vietnamese economy is very open so it will be subject to changes in external markets for Vietnamese goods and services.

As the country cannot control such external changes but can control what types of goods and services it provides and the markets which it competes in, the expert suggested that Vietnam diversify its exported goods and services as well as export markets, in order to be more resilient to any particular economic shock.

He went on to explain that the free trade agreements (FTA) between Vietnam and the European Union, the Republic of Korea, and, possibly, the Trans-Pacific Partnership (TPP), are all very good for Vietnam as it opens the market up for Vietnamese products and may contribute to increasing Vietnam's competition.

"While competing with other agricultural exporters and producers, Vietnam will have to drive reforms in its agriculture sector, so that it can become more competitive and raise the income of farmers and those who live in rural areas, which makes up a high proportion in Vietnam," Sidgwick elaborated.

Meanwhile, he proposed Vietnam focus more on increasing domestic consumption as the country has a large population of 91 million people.

"This is a large market and part of the market is getting richer, which means an increase in domestic demand for goods and services," Sidgwick told Xinhua.

Concerning risks that the Vietnamese economy is facing, the ADB official said there are two risks in its growth model and in the finance sector.

In Vietnam's growth model, despite affirming the critical role of the state-owned enterprises (SOEs), the economist urged the country to allow its domestic private sector to thrive more than now.

"(Potentially)...A lot of efficiency can be gained with the reduction of the state sector and the involvement of the private sector," said the expert.

As for the finance sector, which is heavily dominated by the banking industry, the expert advised Vietnam to solve its bad debts and reform the stock market to mitigate the risks and diversify its sources and modalities of financing.

In conclusion, the ADB chief said that learning lessons from other countries, carrying out reforms to SOEs, deepening the financial market, further improving infrastructure and connectivity, are key elements to continuing Vietnam's successful development path. Endit