Vietnam at the crossroads – An analysis and draft for reform of the vietnamese economy

Nội dung text: Vietnam at the crossroads – An analysis and draft for reform of the vietnamese economy

1. Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 17 Vietnam At The Crossroads – An Analysis And Draft For Reform Of The Vietnamese Economy By Hansjửrg Herr and Rainer Stachuletz1 As the result of the “Doi-Moi” which ranks 1652 in the world (see Table reform policy, Vietnam has experienced 1). In order to prevent its per capita income a remarkable phase of growth since 1986. from falling off because of this huge increase In this period the Gross Domestic Product in population growth, Vietnam needs a real (GDP) quadrupled. Since the population GDP growth of over 5%. Although the of Vietnam (about 88.5 million people in poverty rate was decreased from 58% to 2010) is currently growing by more than 13% between 2003 and 2008, considerable one million people annually, the increase in regional disparities especially between rural per capita income lags behind GDP growth, and urban areas continue to persist3. but still reached 2900 U.S. dollars in 2009, Table 1 Selected macroeconomic indicators of Vietnam 2000 -2009 Macro Indicators 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Real GDP Growth in % 6.80 6.9 7.1 7.3 7.8 8.4 8.2 8.5 6.2 5.32 GDP per Capita (PPP in USD 1423 1535 1648 1814 1949 2142 2364 2607 2793 GDP per Capita (in USD) 402 421 440 492 553 642 730 843 1052 1064 Exports in Mio USD 14483 15029 16706 20149 26485 32447 39826 48561 62685 56600 Imports in Mio USD 15637 16218 19746 25256 31969 36761 44891 62765 80714 68800 Balance of Trade in Mio USD -11535 -1188 -3039 -5106 -5483 -4314 -5064 -14203 -18029 -12200 Current Account in Mio USD 642 670 -419 -1946 -957 -560 -164 -6992 -10787 -7440 Capital Account in Mio USD -526 -476 883 4097 2379 3087 3088 17540 12341 11869 Net Inflow FDI in Mio USD 1101 1252 2023 1894 1763 1889 2315 6550 9279 7600 Remittances in Mio USD 2000 2714 2700 3200 4000 4800 5500 7200 6840 Budget Deficit (% v. GDP) -5.0 -5.0 -4.5 -7.2 -4.5 -4.5 -1.1 -5.3 -4.7 -8.2 Gross Capit. Form. (% GDP) 27.65 29.15 31.14 33.35 33.26 32.87 33.35 38.27 34.61 34.52 Source: IMF Country Reports Vietnam 2003-2010; General Statistics Office of Vietnam (2010) Vietnam’s great success should not GDP), current account deficits are far less but distract us from a number of problems that still high. Vietnam has experienced a surge have developed over the years. The trade in foreign direct investment flows since the deficit in Vietnam accounts for about 15% country joined the WTO in 2007. Annual of GDP. Due to considerable transfers from net foreign direct investment4 has recently Vietnamese living abroad (more than 5% of reached 6.8 billion USD, almost one quarter 1 Hansjửrg Herr is Professor of Supranational Integration at the Berlin School of Economics and Law. He is also the Academic Director of the Master’s programme Labour Policies and Globalisation of the Global Labour University. Rainer Stachuletz is Professor of Finance at the Berlin School of Economics and Law. He is currently acting as consultant for the State Bank of Vietnam at the Banking Academy of Vietnam in Hanoi. He is Academic Director of the study programme of the Berlin School of Economics and Law in Vietnam. 2 The value is the result of the calculation of a basket of goods. In nominal terms the per capita income is just above 1000 USD 3 All statistical data have been taken from the General Statistics Office of Vietnam – Statistics Documentation Centre – (GSO) Ba Dinh Ha Noi 68 Hoang Dieu. Internet: www.gso.gov.vn. 4 Disbursements
2. 18 Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 of Vietnam’s total investments. However, of the industrial sector – with growth rates the structure of foreign direct investment is of well over 10% –in the first years after the problematic (see below). Vietnam realises end of the western embargo (1992-1996) high budget deficits consistently, most there followed a development phase of recently due to considerable governmental industrial growth at about 10%. The growth expenditure for economic stimulus within the service sector developed in a packages, the total volume of which has similar way at this time, while agriculture reached nearly 10% of GDP. In addition, lagged behind consistently. Especially for the integration of the country in the world the labour market, agriculture continues market, the danger of a real estate bubble, to play a decisive role, as about 60% of as well as widespread corruption all add to employable people work in this area. Vietnam’s current problems. Despite high growth rates structural This article analyses on the one hand weaknesses can be detected throughout the current situation in Vietnam, and on Vietnam’s industries. In this respect the the other, outlines a strategy for reform. growing importance of the industrial sector We understand this as a contribution to hides the fact that it has not been able to the controversial debate, to which we develop a growth dynamic in technologically offer our position. advanced segments with high value added. Extended workbench and Dutch Vietnam’s industry concentrates to a large Disease extent (about 50% of total industrial output) With a percentage of 41.6% of GDP, on producing raw materials, mostly at a basic the industrial sector captured the leading technological level and a low level of value position for the year 2009, just ahead of added. Due to its considerable advantage in the service sector with 41.4% and that labour costs Vietnam also takes on the role of agriculture, fishing and forestry with of an extended workbench (outsourcing) in 17.1%. To a large extent the last 20 years light industries of its Asian neighbours, or have been influenced by the increasing as their strategic location for the completion significance of the industrial sector, but of export goods (e.g. shoes or textiles) that also by the service sector emerging at the are subject to import restrictions in the USA same time. After the stormy development and the European Union. Table 2 Structure of nominal Gross Domestic Product in Vietnam 2000 - 2009* Gross Domestic Product By Sources Prel. 2000 2009 1995 2000 2005 2006 2007 2008 (in BII. VND) 2009 in % in % Total GDP 228892 441646 839211 974266 1143715 1485038 1658389 Agriculture and forestry 55555 93450 143037 160462 186462 271477 285030 24.3% 17.2% Fishing 6664 14906 32947 38335 46124 58409 61756 2.9% 3.7% Mining and quarrying 11009 42606 88897 99702 111700 146607 165310 4.8% 10.0% Manufacturing 34318 81979 173122 207027 243142 302136 333166 15.0% 20.1% Electricity. gas and water supply 4701 13993 28929 33464 39869 47169 58592 2.1% 3.5% Construction 15792 23642 53276 64503 79712 95696 110255 6.9% 6.6% Wholesale/retail trade; repair 37491 62836 113768 132794 156442 212139 244933 16.4% 14.8% Hotels and restaurants 8625 14343 29329 35861 44992 57067 67394 3.8% 4.1%
3. Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 19 Transport. storage and communications 9117 17341 36629 43825 51118 66359 72412 4.0% 4.4% Financial intermedation 4604 8148 15072 17607 20756 27215 31617 2.0% 1.9% Scientific activities and technology 1405 2345 5247 6059 7065 9296 10581 0.6% 0.6% Real estate. renting and business activities 12392 19173 33635 36814 43509 53743 60234 5.4% 3.6% Public admin defense; social security 8278 12066 23038 26737 31310 41279 47042 3.6% 2.8% Education and training 8293 14841 26948 30718 34843 38261 42780 3.6% 2.6% Health and social work 3642 5999 12412 14093 16160 19178 21537 1.6% 1.3% Recreational. cultural. sporting activities 1259 2558 4158 4617 5200 5842 6964 0.6% 0.4% Party and membership organis. activities 223 614 1054 1217 1425 1909 2046 0.1% 0.1% community. soc. pers. service activities 4979 9853 16293 18789 21959 28704 33843 2.2% 2.0% Private households with employed persons 545 953 1421 1642 1927 2551 2898 0.2% 0.2% The competitive weakness of the (210%), fishing (132%) or the logistics industrial sector is confirmed with a look and communications sector (308%). Only at the sectors productivity. Productivity in the finance industry (33%) and the totally manufacturing - which increased 110% from inefficient housing sector (-22%) have 1999 until 2009 - lags far behind agriculture faired worse than manufacturing. Table 2 Development of Sector Productivity 2000 - 20095* 2000 2004 2005 2006 2007 2008 2009 Average Productivity 11.7 17.2 19.6 22.2 25.3 32.0 34.7 Agriculture and forestry 4.0 5.6 6.2 7.0 8.2 12.0 12.4 Fishing 15.1 19.6 22.1 24.3 27.6 33.5 35 Mining and quarrying 166.6 223.5 259 265.5 274.6 328.7 346.2 Manufacturing 23.1 30.1 32.8 36.1 39.8 46.3 48.6 Electricity. gas and water supply 169.2 182.9 190 190.2 197.8 203 223.1 Construction 27.7 23.2 26.5 29.8 34.3 38.6 40.9 Wholesale/retail trade; repair 16.1 20.3 25.2 27.9 31.4 41.3 46.4 Hotels and restaurants 20.9 29.8 41.7 49.2 58.7 71.9 82.5 Transport. storage and communic. 14.8 25.3 33.1 38.8 44.6 56.9 60.4 Financial intermedation 108.4 102 105.2 103.6 105 129.4 144 Scientific activities and technology 124.7 172.6 232.2 242.4 273.8 346.9 387.6 Real estate. renting and business activities 300 241.4 242.3 221.6 213.9 223.7 233.6 Public admin defense; social sec. 32.1 35.6 15.1 16.7 18.6 23.3 25.9 Education and training 14.9 19.7 23.8 25.4 27.3 28.6 31.1 Health and social work 26.6 31.5 37.6 40.7 44.6 50.2 55 5 The General Statistics Office in Vietnam defines productivity to be the ratio of sector specific Gross National Product (GNP) and the number of fully employed people in the sector. Source: General Statistics Office of Vietnam (2010)
4. 20 Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 The internal structure of the Vietnamese low level of manufacturing and value added, economy corresponds with the integration in sells services in tourism and plays the role the international division of labour: Vietnam of an extended workbench. exports a huge amount of raw materials at a Table 3 Structure of foreign trade in Vietnam 1999 - 2008 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 EXPORTE TOTAL in Mio USD 11541 14483 15029 16706 20149 26485 32447 39826 48561 62685 IMPORTE TOTAL in Mio USD 11742 15637 16218 19746 25256 31969 36761 44891 62765 80714 Balance of Trade in Mio USD -201 -1154 -1189 -3040 -5107 -5484 -4314 -5065 -14203 -18029 Rohstoffe / Grundstoffe Exporte 5996 8079 8010 8290 9397 12554 16101 19227 21658 27699 Rohstoffe / Grundstoffe Importe 2265 3528 3686 4201 5283 7318 9308 11481 15421 21766 Balance of Trade (Commodities) 3732 4551 4324 4089 4115 5237 6793 7746 6237 5933 Manufactured products Exports 5541 6398 7019 8415 10748 13928 16341 20592 26886 34626 Chemical and related products, n.e.s 147 159 222 262 340 421 536 792 1029 1450 Manufactured goods classified by materials 865 911 990 1125 1355 1890 2165 2926 3976 6398 Machinery, transport and equipments 978 1276 1399 1337 1793 2562 3145 4195 5601 7368 Miscellaneous manufactured articles 3551 4052 4408 5691 7260 9055 10495 12679 16281 19409 Commodities not clasified elsewhere 5 6 0 2 4 3 5 7 18 361 Manufactured products Imports 9470 12101 12532 15532 19792 24084 26633 31531 46028 56219 Chemical and related products, n.e.s 2040 2402 2490 2933 3623 4694 5310 6317 8369 10298 Manufactured goods classified by materials 2736 3402 3729 5415 6672 8859 10172 12164 17062 20113 Machinery and transport equipment 3453 4711 4865 5758 7922 8737 9252 10806 17860 22425 Miscellaneous manufactured articles 1241 1586 1447 1427 1575 1795 1899 2244 2737 3384 Commodities not clasified elsewhere 7 8 13 181 567 820 1879 1316 2728 Balance of Trade Manufactured Products -3930 -5704 -5513 -7117 -9044 -10157 -10292 -10939 -19142 -21594 Source: General Statistics Office of Vietnam (2010) In 2008 the balance of trade showed In the Vietnam example we a record deficit of about 18 billion USD. recognise tendencies of Dutch Disease: Although Vietnam achieved a surplus of The portion of unprocessed raw materials almost 6 billion USD in the area of raw is considerable (in 2008 estimated at 28 and basic materials, its negative balance billion USD from a total of 63 billion for manufactured goods amounted to a USD); in addition the export industry is spectacular 22 billion USD. This intensifies oriented towards labour cost advantages. the impression of a country struggling In all of these factors harbour the huge but currently unable to develop an export risks of a vicious circle. If the industrial economy on a technological and high value sector does not develop in a qualitative added course. way, the country won’t be able to achieve adequate success in education, training,
5. Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 21 and research. The opportunities for the centres, those paradises of tax evasion and development of an ambitious industrial other undesirable activities. It is not up to sector would continue to fall off. The very Vietnam to confront such centres, but at centre of technological development for the same time it does make a difference a country like Vietnam needs to be in the whether FDI is from short-term oriented area of industrial production. Even the investors or from foreign companies with specialisation of high-quality services long-term production interests. Business (as in India) is fraught with risks and models of the globally active private equity ultimately not easier to achieve than industry consist of finance from high industrial development. leverage buyouts (primarily from industrial By virtue of its natural landscapes countries) or of short-term oriented finance the development of the tourism industry from investors in very high-growth sectors constitutes an important pillar for the of the emerging markets. Private equity export economy. Tourism is however a and similar institutions prefer offshore very competitive market, with specific centres with a low level of regulation. segments and market shares already Vietnam, especially the housing sector and largely distributed, while the development the tourism industry, are targets for these of a competitive tourism industry with a short-term oriented and risk-loving funds. widespread domestic network is no piece Just as relevant as the origin of FDI of cake. Without wanting to dampen is the question as to the quality of FDI. general enthusiasm, the most magnificent There has been of late a jump in the growth golf courses, the most exclusive resorts of FDI in the housing sector which does and other touristic accomplishments such not necessarily add technology transfer as unique natural monuments won’t be or development advantages for Vietnam. able to drive technological development Over ten years, between 1998 to the end in Vietnam to the extent needed. Indeed, of 2009, 23.4% of all licensed FDI was especially in the strategic planning of allotted to the housing sector. If hotels and luxury segments, a breadth of impulses for restaurants are included in this real-estate growth cannot be expected. category, the share is more than 35%. Only Are direct foreign investments the in 2009 alone about 75% (incl. hotels) solution? of all licensed FDI was allotted to the housing area. We also have the impression Foreign direct investments (FDI) that even Also in other areas the emphasis may bring technology and qualifications of FDI has been on low level technology into the country, improve management and labour-cost productions with only a skills and open new export channels. This makes FDI a potentially positive source low level of technology transfer. This of capital flows, in contrast to short-term has turned Vietnam into a strategic venue oriented foreign portfolio investments and for the cost reduction policies of foreign foreign bank credits (usually denominated companies. Forward and backward in foreign currency). But it would be bold to linkages between FDI and the Vietnamese classify FDI as advantageous irrespective of industry are relatively insignificant, and its structure. there doesn’t seem to be a clear concept for industrial development. With respect to FDI in Vietnam there is a problem of source. A large proportion The danger of a housing bubble of FDI (more than 40 Bio USD of the total The housing sector is becoming amount of 194 Bio USD licensed projects dangerously overheated. In the western part until the end of 2008) originate from offshore of Hanoi, for example, the property prices
6. 22 Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 increased by about 30% in the fourth quarter with a demand trough, because when it is of 2009. Preferential neighbourhoods in not compensated by other components, it Hanoi now demand up to 15000 USD per slows down domestic growth. With its high square meter, adding them to the world’s foreign deficits, it becomes obvious that most expensive city centre areas. This Vietnam is not following an export-oriented undesirable development is ignited by model of growth like many of the very FDI which is now flowing freely into successful emerging economies. Should Vietnam’s housing sector. This disturbing the housing boom and the construction bubble is not only worthless in terms of industry crash, Vietnam would then suffer industrial development; it also weakens the from a chronic lack of demand last not least whole financial system. The percentage of because of the huge deficit in foreign trade housing finance in relation to total assets of and the current account. the banking system amounts to about 35- Current account deficits that are 50%. The speculative aspects are obvious financed by credit lead to an increase of in the housing sector. Projects that are still debt which is denominated in foreign in the planning stages or in the process currency. In the last ten years Vietnam of being built are sold numerous times; has been able to realise a positive capital some projects are pledged three or four flow structure since capital imports were times for debt financing, so that the actual mostly in the form of FDI. Because of equity capital of many projects is wafer- this and the consistently high transfers thin (Vietnam News 2010). The leveraged from expatriate Vietnamese, precariously risk in this sector degenerates into a game high foreign debt was reduced to a low of roulette. As long as the members of the level compared with GDP. However, high economic, political, social, and academic current account deficits remain a threat elite indulge themselves in the strategy of and could cause currency crises. As the making quick money in real estate markets situation in 2009 has shown us, some further development will suffer. FDI are flexible. Foreign investors can In Vietnam, we see the danger of turn their backs on projects, sell shares substantial medium-term asset and income or transfer capital and profits overseas loss as a consequence of this housing bubble via “designed” company internal transfer and that the financial system will be strained pricing very quickly. Vietnam is in a by non-performing credits. Low-level macroeconomic constellation similar to regulated housing markets tend to become Malaysia before the outbreak of the Asian unstable (Herr/Stachuletz 2010). Other Asian crisis in 1997 – high capital inflow in form countries during their fast develop phase of FDI, high current account deficit, and before the 1990s (Japan, 4 Tigers) enforced an asset price bubble. strict regulations in their housing sectors, The financial system while avoiding excesses by limiting credit The financial system in Vietnam is to a and to a certain extent by establishing rigid large extent state-owned; public companies transaction management (Stiglitz/Uy 1996). are financed by state-owned banks. One of Current account deficit, domestic the secrets of the high level of growth in demand, and currency crisis Vietnam is the massive expansion of credit Society’s demand for goods and by state-owned banks that stimulate high services determine the volume of production investment and thus high domestic demand. and income development in a situation This also explains the high proportion of of free production capacity and available investment in per cent of GDP (see Table labour. Current account deficits are identical 1). Not only Vietnam used the financial
7. Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 23 system to push for high investment. Also quick privatisation nor comprehensive Japan in the 1950s or China after the start of legal measures alone will be able to reduce the reform used a state-controlled banking corruption measurably. Russia is a good system to initiate a credit-investment- example of this. Successful abatement income mechanism which led to high growth. of corruption begins with political will (Herr 2008). It is difficult to tell just how and with credible role models amongst a much credit has been and still is decided society’s elite. politically. Apart from this pillar of growth, Outline of a reform package smaller companies have been created, Vietnam has high potentials for a forming a partly informal sector which is sustainable development and will be able to subjected to brutal capitalistic logic, usually make good use of its chances for development with a low-level of technology and cut off if they correspond with its resources and from the official financial system. Also this goals, as well as the careful selection of sector added to economic dynamic. these opportunities especially in quality This outlined largely politically growth development. We are convinced that controlled credit - investment - income a framework for sound industrial policy is mechanism produced high growth rates in the possible in a process of social dialogue, and past, but it has also weaknesses. On the one that this will strengthen the sustainability of hand the allocation of credit lacks transparency, Vietnam’s industrial and natural potentials. and there is a danger of non-performing In the ideal case, Vietnam should design credit that would strain the financial system. a clear industrial policy that is dovetailed It appears to us that the banking system is with foreign policy, and at the same time currently working inefficiently due to no pursue steady macro-economic demand access to effective credit technology which management that allows for high growth. In is necessary to support an efficient financial the following we outline such a strategy.6 system. Secondly, when the private sector is Demand Management cut off from the supply of credit and is forced The demand for goods in a country to develop an informal credit market, this like Vietnam has to be set up on a number creates new problems of efficiency. of pillars. Of central importance is private Corruption and public investment demand which must The functioning of the Vietnamese be driven by a highly productive financial economy is burdened by corruption or a system that serves the real economy. Selected partially corruption like system of fees. foreign direct investments can add support, The corruption index of Transparency especially in the area of technology transfer. International (2010) shows Vietnam at rank Current account deficits are to be avoided; 120 out of 180 countries for the year 2009. the aim is an export orientation, albeit Corruption pervades almost all areas of the without a high current account surplus. It Vietnamese economy and administration. is important to achieve sufficient domestic Since only some members of society are demand, as this is essential for dynamic able to afford these corrupt payments, an domestic growth. overflowing corruption systematically To stimulate domestic demand, a damages not only the feeling of fairness relatively balanced income distribution is amongst the Vietnamese people but it a must. This can be achieved by the further also leads to inefficiencies. Vietnam is development of job market institutions fighting against corruption, but neither including free systems of wage negotiations 6 Vergleiche dazu auch Dullien/Herr/Kellermann (2009). 7 Vietnam is in an excellent position for the development of wind, biothermic, and photovoltaic energies.
8. 24 Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 and a simple comprehensive social network State protection and state support is then for everyone. The ratio of government necessary to implement the selected spending to GNP in developing countries development strategy. needs to be sufficiently high (Stachuletz In the ideal case, Vietnam should 2011). With the exception of state design a clear industrial policy that is investments in which the government can dovetailed with foreign economic policy, remain indebted for longer, budget deficits and at the same time pursue steady macro- should be balanced within the business economic demand management that allows cycle and not lead to an increase in the for high growth. national debt. This reiterates the necessity Direct investment and foreign trade of an established system of taxation which contributes to an acceptable level of FDI should be navigated in such a way income distribution. that development is pushed forward and in concert with industrial policy. This includes Industrial policy and high value-added negotiating with foreign investors as to the All industrial and successful amount of technology they can bring into developing countries need to have active the country and to agreeing on a minimum protection and support of its infant of domestic input including manpower in industries (Chang 2002). One starting Vietnam. Foreign companies should also point would be the systematic support of not be given an advantage over domestic the further processing of domestic raw firms. When capital imports are neutralised materials. As an important producer of by foreign exchange market interventions foodstuffs, Vietnam could develop this area of the central bank, FDI can be connected of processing, in order to improve their with a balanced current account or one perspectives on producing high quality with a modest surplus. China is the latest competitive products for global markets. example of this, although there is no reason Of course an ecological tourism to exaggerate such a policy. On the whole industry that is linked with the domestic capital import controls must support such economy can also play a role. Vietnam a policy. Foreign portfolio investments could become a role model in the area of and the financing of domestic sectors with sustainable ecological development. In foreign loans are dangerous; they do not order to close the energy gap requirements support development and should be kept Vietnam will have to decide between the to a minimum. In the meantime the word long-term development of regenerative, is out even for the International Monetary mostly de-central energy plants and Fund that the liberalisation of international the development of environmentally capital flows did not bring about success for problematic facilities that run on fossil developing countries, but rather volatility fuels or even the entry into atomic energy and instability of the financial systems with technology. Governmental investment significant negative consequences for the in the infrastructure of almost all areas real economy. is substantial, as is state sponsorship of The present current account education. We are convinced that a state constellation is dangerous for Vietnam commission of experts who keep an eye because it can lead to a currency crisis on all of the interests in Vietnam is able and at the same time can weaken domestic to develop a sound concept for industrial demand. The goal should be to balance development, which should then be the current account as soon as possible. It adapted and applied continually, in line would be best to achieve a real devaluation with experience and economic changes. in which the nominal exchange rate of
9. Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 25 the Dong remains stable, while Vietnam in all branches are examples of successfully becomes more competitive by means of a managed state-owned companies. low domestic inflation rate and increases in Germany has also had good experience overall productivity. with the models of co-determination, in Housing markets which worker representatives participate For the stability of the economy the in overseeing management and take part housing sector must be regulated. Foreign in company decision-making. To oversee direct investment in this area is fundamentally companies efficiently a functional financial undesirable and should only be allowed in system that can place restrictions on exceptional situations. In order to prevent companies is also of importance. asset bubbles credit strict credit restrictions, Financial system a capital gains tax and similar instruments Financial systems should serve must be implemented. the real economy. This function can be Selective privatisation taken over by relatively simple structured A large part of Vietnam’s economic systems. For example, the central bank activity is carried out in state-owned could set and control the credit volume of companies. Since the country’s entry into the commercial banking system with credit the WTO at the latest, Vietnam has joined ceilings or window guidance. At the same others, at least formally, in the pursuit of time the central bank can set deposit and a liberal market reform policy which also lending interest rates, in which positive entails a quick privatisation. According but low real interest rates should be the to the Enterprise Law privatisation was aim. Commercial banks then assume a key targeted for 1 July 2010. However, there role in credit allocation and the control of has actually been little change. This should companies’ efficiency. not however be seen as a problem since The government can remain owner quick privatisation did not for example of the majority of banks, as privatising help development in Russia, while China’s banks quickly and extensively, especially very cautious privatisation process has to foreigners, does not normally lead to developed superbly. a positive development of the whole Companies dealing in public goods economy. Like any other state-owned (water and energy supply, waste removal, companies, state banks can be managed transport, health systems, education, efficiently. The “Sparkassen” (savings etc) should remain under state control as banks) and “Genossenschaftsbanken” (co- experience in industrial nations has shown. operative banks/credit unions) in Germany Companies of strategic importance should are good examples of this position (Herr/ not be privatised. Instead, for all types of Stachuletz 2010a). businesses including state-owned companies, The government should influence the legal, social and political pre-conditions credit allocation in order to be able to for functional management is the key. The pursue industrial policy aims. For this latter is usually in place, while management purpose special banks make sense, which functions and owner functions are strictly are separate from normal banking. Policy separated. We advocate a transformation of state-owned companies to public share credits should be made transparent and companies, whereby management would reserved for special purposes. be appointed and controlled rigorously. In The central bank should also have Germany, both former and current state- the instruments needed to influence credit owned, listed and globally active companies allocation from a macro-economic point
10. 26 Ho Chi Minh City Open University Journal of science- No. 1(1) 2011 of view, for instance to limit or boost the General Statistics Office Of Vietnam (2010) credit volume for the housing sector in - Statistics Documentation Centre – specific situations. (GSO) Ba Dinh Ha, Noi, 6B Hoang An important step towards an increase Dieu, Internet: www.gso.gov.vn of professionalism and independence of the Herr, H. (2008): “Financial Systems in banking system is to disentangle financial Developing Countries and Economic institutions that are linked to state-owned Development”, in: E. Hein, T. Niechoj, companies or private institutions. In addition, P. Spahn, A. Truger (eds.), Finance-led the banking system should be reformed in a Capitalism? Macroeconomic Effects way that small businesses can be provided of Changes in the Financial Sector, with loans and financial services. For this Marburg: Metropolis. the development of microcredit institutions Herr, H., Stachuletz, R. (2010): “Die should also be considered. Immobilien-Bubble: Makro- und In a country like Vietnam the banking mikoửkoomische Entstehungsmuster system should be at the centre of company nachhaltiger Instabilitọten und financing, while the stock market can Wege aus der Krise”, in: M. strengthen companies’ equity status by Kỹhnbergber, H. Wilke (Hrsg.), issuing new shares. The stock market Immobilienbewertung. Methoden should receive support for this, whereas und Probleme in Rechnungswesen, borrowing from banks for speculation Besteuerung und Finanzwirtschaft, purposes must be prevented. Complicated Schọffer-Poeschel Verlag, Stuttgart, derivatives should notplay a role for S. 365-394. countries like Vietnam. Herr, H., Stachuletz, R. (2010a): Reform Governance Options of Financial Systems. Global It is never quite clear what is meant Labour Column, by good governance. After the experience labour-university.org/ of the sub-prime mortgage crisis, the simple IMF Country Reports Vietnam 2003-2010, transfer of western institutions to Vietnam is Washington D.C. obviously not a solution. Vietnam needs to Stachuletz, R. (2011): Anmerkungen seek a transparent and productive interaction zum Mọrchen von der optimalen between markets and state control or Staatsquote und das Ende der regulation. There is no secret recipe here but Privatisierungsagenda, to be published rather country-specific solutions. Corruption Hanoi 2011. in the form of a hidden scale of fees can be Stiglitz, J.E., Uy, M. (1996): “Financial made transparent and converted into a more Markets, Public Policy, and the East binding system of charges. Corruption Asian Miracle”, The World Bank influences important decisions within the Observer, 11: 249-276. society, endangers social coherence and Transparency International (2010): must be opposed forcefully. Corruption Perception Index. References Vietnam News (2010): “Tightened Credit Chang, H.-J. (2002): Kicking Away the Chills Real Estate Sales”, 18 September Ladder, Anthem. 2010, Hanoi, p. 17. Dullien, S., Herr, H., Kellermann, C. (2009): Der gute Kapitalismus, Transcript, Bielefeld.