IMF Calls On Vietnam to Step Up Structural Reform to Spur Investment
August 6, 2000 - 0:0
TEHRAN The International Monetary Fund on Friday called on Vietnam to speed up the pace of economic reform in order to attract investment and shore up the country's year-old recovery.
According to an AFP report, IMF executive directors, welcomed a rebound in the Vietnamese economy, which they said began in mid-1999 in response to strong exports and easier credit policies.
Gross domestic product expanded 4.25 percent last year and is projected to increase 4.5 percent in 2000, driven largely by domestic demand, according to the IMF.
But the directors added that while progress on structural overhaul was made in 1999 and the first half of this year, "the gap between plans and action remained wide and the pace of reform continued to be slowed by the time needed to build broad political support." They noted "with concern that investment remains depressed and stressed that for the recent recovery to be sustainable, it must be accompanied by supporting structural measures to attract needed foreign direct investment." In particular, the IMF urged that concrete measures be taken to improve bank management to check the flow of bad loans and to cut back on politically directed lending.
In addition, "nonviable, loss making" state-owned enterprises should be closed or liquidated and safety nets provided for displaced workers.
The directors also urged Vietnam to increase the flexibility of its exchange rate system and to simplify exchange control procedures, notably by removing constraints on payments and transfers for current account transactions.
While the government's "accommodative" stance on fiscal spending in the past two years was appropriate, the budget in the medium-term faces "substantial risks" in the form of lower revenues, heavier debt burdens and losses incurred by state-owned enterprises, according to the fund.
In the face of such risks, it added, wage restraint will be essential, as will be efforts to boost revenues.
But at the same time, the directors maintained, authorities should increase the share of expenditures earmarked for social needs.
In further comment the IMF hailed recent progress aimed at opening the Vietnamese economy to external competition, especially the removal of quantitative restrictions on certain items.
Vietnam and the United States on July 13 signed a landmark trade deal to further open the Vietnamese market to U.S. goods and services and to expand Vietnam's trade privileges in the United States.
According to an AFP report, IMF executive directors, welcomed a rebound in the Vietnamese economy, which they said began in mid-1999 in response to strong exports and easier credit policies.
Gross domestic product expanded 4.25 percent last year and is projected to increase 4.5 percent in 2000, driven largely by domestic demand, according to the IMF.
But the directors added that while progress on structural overhaul was made in 1999 and the first half of this year, "the gap between plans and action remained wide and the pace of reform continued to be slowed by the time needed to build broad political support." They noted "with concern that investment remains depressed and stressed that for the recent recovery to be sustainable, it must be accompanied by supporting structural measures to attract needed foreign direct investment." In particular, the IMF urged that concrete measures be taken to improve bank management to check the flow of bad loans and to cut back on politically directed lending.
In addition, "nonviable, loss making" state-owned enterprises should be closed or liquidated and safety nets provided for displaced workers.
The directors also urged Vietnam to increase the flexibility of its exchange rate system and to simplify exchange control procedures, notably by removing constraints on payments and transfers for current account transactions.
While the government's "accommodative" stance on fiscal spending in the past two years was appropriate, the budget in the medium-term faces "substantial risks" in the form of lower revenues, heavier debt burdens and losses incurred by state-owned enterprises, according to the fund.
In the face of such risks, it added, wage restraint will be essential, as will be efforts to boost revenues.
But at the same time, the directors maintained, authorities should increase the share of expenditures earmarked for social needs.
In further comment the IMF hailed recent progress aimed at opening the Vietnamese economy to external competition, especially the removal of quantitative restrictions on certain items.
Vietnam and the United States on July 13 signed a landmark trade deal to further open the Vietnamese market to U.S. goods and services and to expand Vietnam's trade privileges in the United States.