HANOI - The Vietnamese politburo, facing slowing economic growth and runaway
inflation, has mapped out measures to improve economic development in the
country in the remainder of this year.
The government's challenges include achieving 7% economic growth in the year
after first-half expansion of 6.5%, inflation of 27% and rising, and
difficulties in investment and production due to increasing costs, a lack of
capital and a fluctuating exchange rate. The financial and stock markets also
remain unstable.
Workers trying to match rising pressure on their wallets, not least from a 31%
increase in the price of petrol, are striking to back up demands for higher
pay. Nearly 5,000 laborers at the Kingmaker
footwear plant in the Vietnam-Singapore industrial zone in southern Binh Duong
province, near Ho Chi Minh City, walked out earlier this month to back demands
for a rise in their 1 million dong (US$60) per month salaries, Agence France
Presse reported. More than 1,000 workers are also on strike at a South Korean
factory in Long An province, the report said, citing the Thanh Nien daily.
Vietnam on January 1 raised the minimum wage to 540,000 dong for state
employees, to 620,000 dong for workers in state-owned companies, and to between
710,000 and 1 million dong for workers in foreign-invested enterprises.
A politburo statement last week claimed positive results had been achieved in
curbing inflation, stabilizing the economy, ensuring social security and
maintaining economic growth. The country is feeling the impact of the
crisis-hit US economy and spiraling global commodity prices, while there is a
lack of government action plans and synchronized guidance of local authorities.
To rein in inflation, forecast by HSBC to climb above 30% year on year this
month after July's 27%, and stabilize the economy, the politburo pointed to the
need to continue monetary tightening policies, and to adjust the exchange rate
to boost exports. It also said steps were required to prevent speculation, to
manage operations of commercial banks and to improve the effectiveness of the
banking system.
Declining prices for a variety of goods in Ho Chi Minh City suggest
anti-inflationary policies such as increasing interest rates already taken by
the central bank may be succeeding, with prices falling for a variety of good
in Ho Chi Minh City, the Vietnam News reported, citing distributors and
traders. The prices of cement and steel in Vietnam's largest city have fallen
as local demand weakens, the newspaper said. Steel prices have declined 5% over
the past two weeks, while cement prices are 1% lower than a week ago, according
to the report.
The currency, the dong, meanwhile gained 1.8% in the seven days to August 11
before weakening again this week to 16,520 per US dollar on Tuesday. The
currency has weakened from 16,144 per dollar at the start of the year.
The politburo asked the state-owned sector and businesses to improve the
efficiency of investment capital from the state budget. It urged related
ministries and agencies to effectively implement measures to reduce the trade
deficit, while adopting import and special consumption taxes and non-tariff and
monetary policies in line with international commitments. The trade gap in the
seven months through July more than doubled to $15 billion, up from a $6.3
billion shortfall in the same period a year earlier, Bloomberg reported on
Tuesday, citing preliminary figures from the General Statistics Office in
Hanoi.
The politburo called for more efforts to stamp out inappropriate regulations
that hinder investment, production and trade activities. Priority should be
given, it said, to boosting agriculture, forestry and fisheries while
conditions should be improved for development of industrial and services
sectors.
Prime Minister Nguyen Tan Dung has instructed the finance and agriculture
ministries to provide more than $70 million in aid to support fishermen,
ThanhNien News.com reported on August 3. Fishermen have been hit by rising fuel
prices and some have kept their boats docked in harbor rather than voyage out
to sea.
The politburo said funds agreed to in the state budget and from other sources
such as foreign direct investment, development assistance and government bonds
should be disbursed more speedily to meet capital demand for manufacturing and
capital projects.
Flexible tax policies should also be used in support of production and trade,
particularly with regard to small and medium-sized businesses, while
restructuring of state-owned businesses to bring them to market was also
needed, the politburo said. At the other end of the economic spectrum, measures
such as social security to help the poor, low-paid workers, and ethnic
minorities should be simplified.
The politburo also indicated its intention to step up reforms and attack
corruption. At the same time, it said press agencies had to supply accurate
information on the party and state policies and take measures to fight against
negative propaganda by "hostile forces".
Even as the politburo sets out its year-end goals, the economic outlook is
brightening a little, with commodity prices slipping and cost of fuel such as
liquefied petroleum gas cheaper because of declines in global markets, Vietnam
News said. The local price of rice has also eased, according to the newspaper.
Industry should also benefit from a decrease in power outages. The Viet Nam
Electricity Group (EVN) had boosted power generation to 90% of its total
capacity, a report on the Vietnam News website said on Wednesday. That
represents a 20% increase in supply over July and may help GDP growth, which
slowed in the first half from 7.9% in the first half last year, to pick up
pace.
"Most reservoirs serving hydroelectricity plants are full now," EVN general
director Pham Le Thanh. "The current shortfall is mainly due to the fact that
several new plants are yet to be completed and some others are under
maintenance."
EVN made a loss of 1.4 trillion dong (US$ 87.5 million) this year following the
fuel price increase, he said. The company is seeking permission to increase
tariffs, which were not raised when fuel prices were increased, the report
said.
The stock market, among the world's worst performers this year, is also showing
signs of a recovery. On Tuesday, the VN-Index closed up more than 5 points at
459.89 on higher trading volume, Vietnam News Agency reported. The index
plummeted from a closing high at 1106 early last October to 366 on June 20.
(Asia Pulse with additional reporting by Asia Times Online.)
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