Positive but inefficient
A consultation on reform with a focus and roadmap to 2025 was recently held by the Central Institute for Economic Management (CIEM) and the Australia-Vietnam Economic Reform Program (Aus4Reform). Many participants said Vietnam had reformed its institutions and become an exemplary model in the region in terms of business environment improvement, but its achievements are nonetheless below expectations.
According to CIEM Director Tran Thi Hong Minh, the world economic context has been complicated by Covid-19. The pandemic's long outbreak this year from late April to September severely affected many localities, especially their economic recovery and growth.
The government is giving priority to ensuring macroeconomic and social stability while consulting with the business community on decisions and efforts to maintain institutional reform during this difficult period, realizing tax, credit and subsidy policies for employees and simplifying related procedures. Vietnam’s drastic reform has been highly rated by the international community, and Vietnam has emerged as an exemplary model in terms of institutional reform in the region.
Institutional reform especially in competition policy and business environment has significantly contributed to strengthening the confidence of businesses and investors in Vietnam. Minh said that in some areas, reform may have "reached the institutional ceiling", making it difficult to create more breakthroughs without more drastic solutions. In that context, thinking about national renewal in a modern way is even more necessary to support reforms.
Institutional reform, a priority
Although the pandemic's fourth outbreak in Vietnam is under control, signs are emerging of a new resurgence, and the economy is still facing difficulties and challenges. Foreign or importing countries are using technical measures to control imports, including those from Vietnam. The risk of supply chain disruption significantly increases costs for exporters as well as domestic commercial enterprises. Domestically, the pandemic affected production and trading activities in particular and economic growth in general, and slowed down public investment disbursement.
The economy is expected to face many difficulties and challenges in the remaining months of 2021. According to Minh, many international organizations have taken a more cautious view of Vietnam’s economic development prospects. The World Bank’s updated report estimates Vietnam's gross domestic product (GDP) this year at between 2.0 and 2.5 percent, significantly lower than the 4.8 percent forecast released in August.
Economist Pham Chi Lan said that without reform, it would be difficult for Vietnam's economy to recover. Therefore, besides focusing on pandemic control, the government should pay attention to institutional reform.
The CIEM Director Tran Thi Hong Minh said the following five solutions should be top priorities in institutional reform in Vietnam. These include maintaining reforms upon economic recovery and simultaneous implementation of reforms and economic recovery; mobilization and utilization of resources for economic recovery and development; creation of space for new economic activities in a sustainable way, such as the digital economy, circular economy, and sharing economy; creation of momentum for institutional reform towards good international practices to ensure integration, recovery and sustainable development; and improvement of internal capacity in general and of the private sector.
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