Workers at Phong Phu Garment Export Company in central Quang Tri Province make trousers for export, a sector that has made increasing contributions to Viet Nam's growth but remains low value added. Experts agree that institutional reform is imperative if Viet Nam hopes to achieve sustainable economic growth. — VNA/VNS Photo Ho Cau

QUANG NINH (VNS) — Viet Nam's economy would face many difficulties in the future, economic experts said yesterday at the spring Economic Forum.

And they added that the official growth rate did not reflect the real situation.

They also agreed that aggressive and drastic institutional reform must be carried out to keep the country economic healthy.

The two-day forum was held by the National Assembly's Economic Committee to propose resolutions for the national economy in the coming year. The best suggestions will be selected for submission to the NA.

Speaking at the forum, the director of the Viet Nam Institute of Economics, Tran Dinh Thien, said the economic growth rate was not steady.

"The quality of growth and competitiveness is low, consumption and investment are going down, especially in the private sector, people's incomes are declining - and bad debts and public debts mostly remain at the same level. The number of enterprises closing down has also risen to 11.9 per cent," he said.

"Meanwhile, we haven't seen any breakthrough institutional reform. This means the economy has stayed in a similar position after three years of restructuring," he added.

Cao Sy Kiem, from the National Financial and Monetary Policy Advisory Council, agreed, adding that in his opinion, the economy was far too fragile.

"While some enterprises have started to recover, it must be admitted that many evaluations of the economy are still vague and the health of many enterprises are questionable. One small congestion caused by State management could lead to dramatic consequences for enterprises," Kiem said.

Nguyen Van Giau, head of the National Assembly's Economic Committee, said the most important issue facing the macro-economy was non performing loans and public debt, as they closely affected the circulation of capital. He said the economy would remain weak until these issues were resolved.

According to a report by the Ministry of Finance in March, Viet Nam's public debt is as much as 48 per cent of the country's Gross Domestic Product.

State budget costs in 2013 increased nine times compared to the year 2000. Of this amount, payment of public debts increases by 4.1 times.

"Public debts should not be under-estimated. If we don't take a serious look at this matter, it will be too late when the due date comes," said NA deputy Tran Du Lich.

Thien of the Institute of Economics said it was time to adopt a different perpective on public debts.

"The definition of public debts and bad debts is not clear. Statistics on such debts are so different among agencies. The current belief is that we are under-estimating public debts," he said.

Nguyen Dinh Cung, director of the Central Institute for Economic Management, said the Government had to increase budget collection by adjusting goods prices and imposing fees, but this would result in great difficulties for the production sector.

"If State budget spending is still high, we need to foster privatisation with State-owned enterprises instead of borrowing money from our people."

Given the shortcomings of the economy, experts agreed institutional reform was now of significant importance.

Cung said the current role of the State in the market economy was no longer appropriate.

He said the main matter in carrying out institutional reform was to deal with the relationship between the Government and the market, giving the market the key role.

"It's the rule of the market economy; we need to respect this rule. The Government can't interfere too much in its operation," Cung said.

He also recommended that a stricter policy be imposed by the State budget on State-owned enterprises.

"They need to face the lack of investment capital and choose the most effective investment projects," he added. — VNS