Vietnam Institute of Economics director Tran Dinh Thien expresses
concerns about the possible return of inflation when long-term radical measures
to restructure the economy have yet to be strongly expedited.
The consumer price index (CPI)
rising against in August after sliding in two previous months has triggered
inflation concerns. Is that true?
Those concerns are practical when
the CPI in August picked up 0.63 per cent against the previous month after
sliding 0.26 per cent in June and 0.29 per cent in July whereas the monetary
policies showed signs of being loosened. This had a precedent in the past.
The economy is in a fix both
domestically and internationally. Locally, there are two scenarios in my view.
In the first scenario, the economy is being cooled down with sinking demand.
Prices continue to slide, showing low consumption.
In the second scenario, inflation
might roar back if we did a bad job with handling monetary policies. Both
scenarios must be taken into account with close control measures.
A strategic vision is urgently
needed since for the economy to step into a new development period we must be
consistent with our restructuring commitment. In this respect, we had yet to
see a robust start-up until present.
Is the current situation so
pressing that it needs immediate treatment?
Apparently, an economy with a lot
of mishaps as presently must be put under tight control to ensure it is not
worsened like bad debts, firms’ massively going bust or dissolved or risks to
the banking system.
Besides, to realise long-term
solutions we need to get rid of current short-term problems.
Concentrating on long-term and
radical solutions should be established. Stagnation means decreasing
investment. We could not revive investment through pumping more and more money
into the economy as in doing so, inflation will surely come back. We would fail
to rein in macroeconomic uncertainties at that time.
Reminding the possibility of
disinflation, slow growth against high inflation is also important to stay
vigilant with unexpected occurrences.
What is the ‘cure’ to the current
investment climate?
There is not a cure that helps
turn the investment environment immediately appealing to investors. That is
because current problems of the economy did not come from recent faults, but
from weaknesses inner the economy, from less effective distribution of
development resources and the growth model too reliant on extraction of natural
bounty.
Thereby, revising some
regulations are not solutions to conversion, but it is important to modify
entire resources distribution system. We should not present too high targets
when actual resources remain limited.
Radical changes are also crucial
in preparing quality human resources for future economic growth. We do not want
to lure foreign investors based on our low-cost labour advantage that has gradually
lost its charm when skilled technical workforce is insufficient.
Khanh Linh | vir.com.vn
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