In the first part of the talk published on November 15, Benedict Bingham, Senior Resident Representative of IMF analysed the reasons behind the depreciation of the dong. He said that the Government needs to make a bigger effort and take more drastic measures to restore the public confidence.

In the second part pf the talk published on November 17, the World Bank Vietnam Country Director Victoria Kwakwa noted that Vietnam has been too concentratedi on economic growth rate. It is not because of the pressure put by international organizations, but it is the “tradition” of a centralized economy which focuses on plans, targets and achievements.

And here is the third part of the online roundtable talk.

Viet Lam, VietNamNet Journalist: Mr Thien, as an economic consultant to the Government, do you think that policy makers now have given up the thought of obtaining high growth rate at any costs?

Tran Dinh Thien, Head of Vietnam Economics Institute: All countries in the world want to obtain high economic growth rates. However, the problem here is that we have to calculate how much we will have to pay for the growth.

The reality shows that the cost of growth is high in Vietnam. We have to spend 8-9 dong in order to obtain one dong of growth. Besides, we also consume much in natural resources and cheap labour force.

We can see that obtaining high growth rate is the top priority task the Government of Vietnam sets for itself. But when there are signs of macroeconomic uncertainties, the Government will prioritise the macroeconomic stability. When the economic growth rate seems to be low, the Government will pour more money to push the growth rate up. In this case, the Government sacrifices the stability to obtain high growth rate.

Though I think that the national economy still needs high economic growth rates, I believe that the state should prioritise the macroeconomic stability.

When the state obtains macroeconomic stability, businesses and people will have confidence to inject large sums of money in investments. If so, the economy will automatically see high growth rates.

If the state does not pay attention to macroeconomic stability, and concentrates on growth rate too much, this will be like building too many roads very quickly, with holes appearing just several days later,

Out of the high growth rate and growth quality, neither should be ignored. If we do not try to go at high speed, we will lag behind the world.

Victoria Kwakwa, the World Bank Vietnam Country Director: Regarding the “exchange” that Mr Thien has mentioned, I think that the sacrifice of stability for high growth rate would be applied in short term only. In long term, it is the macroeconomic stability, which can create the foundation for growth.

Therefore, if we concentrate on the issues to obtain stability, we will finally also obtain our target of high growth rates.

The macroeconomic instability, if persisting, will create negative impacts on the growth.

I have to emphasise that that we need to take actions soon, right now.

Viet Lam, VietNamNet Journalist: Mr Thien, what do you think about the macroeconomic targets approved by the National Assembly? Is there any contradiction in the targeted 7.5 percent growth rate and less than 7 percent inflation rate? Especially that in other countries, the inflation rate of seven percent would be considered a big problem?

Tran Dinh Thien, Head of Vietnam Economics Institute: I believe that it is not difficult for Vietnam to obtain high economic growth rate. Even the 10 percent growth rate would be within reach. Therefore, the targeted 7.5 percent growth rate is not be a difficult talk at all. However, we should not too concentrated on the easy talk and ignore the difficult task.

The difficult task here, I mean, is stabilizing macro economy and curbing the inflation. There are two issues with this.

First, it seems that Vietnam has been paying attention only to the consumer price index (CPI), and it has not been paying sufficient attention to the prices of other goods, such as stocks, gold and real estate. Therefore, in order to stabilize the macroeconomy, we can’t only focus on pushing the goods’ prices down, but also need to stabilize the prices of all kinds of assets.

 Second, a question has been raised whether it is feasible to bring the inflation rate down to five percent. It is very difficult, but possible. Vietnam needs to do to things to curb the inflation rate: the first thing is to reduce the budget spending. Vietnam should not maintain the high spending level of 42-43 percent of GDP per annum. We also should cut the number of public investment t in order to govern the projects most effectively.

The second thing we should do is to restrain our ambition for high growth rate. We need to aim at sustainability, even if the growth rates are only five or six percent.

Senior Resident Representative of IMF Benedict Bingham: I agree with the opinion that the inflation rate of seven percent is overly high. The Government of Vietnam should set a more ambitious target. It needs to send a message to investors that it is necessary to force the inflation rate down to 3 or 4 percent, the average inflation rate in other Asian countries.

The Government also needs to send another message to investors that the Government commits to reduce the public deficit. I agree with Mr Thien that the discipline in budget spending will help reduce the deficit considerably.

If Vietnam gathers strength on stabilizing the macroeconomy, adjusting the development strategy by focusing on sustainable development, it will have no reason to fail to obtain the high economic growth rates like it did in the last 20 years.

Viet Lam, VietNamNet Journalist: Let’s talk about the public investments. Did the World Bank say to Vietnam before that Vietnam spends money ineffectively? What will the World Bank say if the Government of Vietnam requests a loan to fund the project on express railway?

Victoria Kwakwa, the World Bank Vietnam Country Director: We have been working regularly with the Government of Vietnam to negotiate the loans. We always discuss how the Government’s reform progress goes and what measures should be the most suitable. We try to have influence by opening dialogues with the Government, giving consultancy. Of course, the efficiency in investments and public spending are a big topic in our discussions.

Regarding the express railway, we will have to consider if the big project can get the consensus in the society. The important thing is that it needs to get the support from people.

Besides, we will also have to make an analysis to find out if the investment will bring effects, and if we have enough strength for the very big and very costly project.

The express railway project will cost a lot of money, while we still have many things to care about, including the projects in education and healthcare.

Source: VEF – VietNamNet