ASEAN KEY DESTINATIONS
Restructuring Vietnam state enterprises
The economist, who was speaking at a forum in Ha Noi to discuss the management of SoEs, reminded his audience that restructure of the economy was the focus of the National Economic Development Strategy for the 2011-20 period.
The restructure of enterprises, especially SoEs, was crucial to the plan's success, he said. The economist used Vietnam's Incremental Capital-Output Ratio (ICOR), the ratio of investment to growth, as proof of his argument.
"The country's ICOR was 3.5 in 1991-95 and jumped to 6.6 in 2008 and 8 in 2009," he said. "In other words, Vietnam has to spend VND8 worth of capital investment to generate VND1 worth of growth."
Financial institutions such as the World Bank say that an ICOR of three indicates effective investment and sustainable development.
"This shows Vietnam's investment capital is not used effectively to serve growth," Dr Dam said. The economist said it was accepted that national economic growth had followed investment and the exploitation of natural resources.
But the ineffective use of capital and natural resources now made it necessary to quickly change management methods.
The economist provided figures that showed investment as a percentage of Gross Domestic Product jumped to more than 46 per cent in 2007 from 18 per cent in 1990.
Government measures to control inflation had reduced it to about 41 percent but the gross rate still averaged almost 43 percent of GDP between 2006-10.
The figures were much higher than those of the newly-industrialised economies and territories of 1960-80, Dr Dam said.
"The investment as per cent of GDP in South Korea was 23.3 per cent and Taiwan 26.2 per cent but they still gained economic growth of 7.9 and 9.7 per cent.
"It's a worry that the more we invest, the less the investment efficiency is," he said. CIEM president Le Xuan Ba said SoEs consumed vast amounts of State capital - more than any other business sector - but their operation remained unsatisfactory.
"Many of them are making loss with shipbuilder Vinashin a typical example and ineffective corporate management is a major cause," he said.
The forum, Restructuring and Innovating the Management Regime of the State-owned Enterprises towards the Model for Efficient Economic Development, was held on Wednesday.
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