Vietnam’s PM continues to show support for private sector growth

August 11, 2017

HANOI – Vietnam’s Prime Minister, Nguyen Xuan Phuc, has again expressed a firm commitment to support for the private sector, which currently contributes approximately 43% to Vietnam’s GDP growth. He has called for a higher contribution from the private sector to future GDP growth, with a target in the range of 50–60%.

The Prime Minister was a speaking at the 2017 Vietnam Private Sector Forum in Hanoi (a platform initiated in 2016 by the new Government to exchange direct dialogue between the office of the Prime Minister and the private sector.

Vietnam Asset Management says that while PM Phuc has demonstrated continuous efforts to improve Vietnam’s investment environment and to implement his pro-business policy, “progress has not been as desired so far, though it is generally encouraging sentiment among the entrepreneur community in Vietnam”.

As of July 2017, Vietnam had nearly 73,000 “newly-established” enterprises (+13.8% YoY) with total registered capital of VND690 trillion (approximately US$30.3 billion) (+39% YoY).

“On a related note,” VAM says, “on July 10, the State Bank of Vietnam (SBV), in response to the PM’s direction to reduce interest rates to support business, reduced both policy rates (discount rate and refinancing rate) by 0.25% to 4.25% and 6.25%, respectively.

“The lending rate cap for VND short-term bank loan to some priority sectors/businesses was also reduced by 0.5% to 6.5% p.a.

“Most recently, the official target for FY2017 credit growth has been revised up to 20% from 18%, and this is likely to be achieved given banks’ accelerating lending activities.”

Stable foreign investment inflows into Vietnam year-to-date and a relatively stable USD/VND exchange rate provided room for the SBV to add US$1 billion to the foreign reserves and brought them to a new high at estimated US$42 billion at end of the first half,” VAM says.

“As of July 20, registered and additional FDI continued to accelerate to US$21.9 billion (+52% YoY), of which US$3.12 billion was received via foreigners’ purchasing stakes and shares of local companies (+109.7% vs. 7M 2016).

“Meanwhile, disbursed FDI increased modestly at +5.8% YoY to US$9.1 billion. Remarkably, in the first seven months, foreign investors net bought US$700 million in bonds and US$530 million in equities, making their total net buying value to US$1.23 billion on Vietnam stock market.

“This shows increasing confidence of foreign investors in the country’s growth outlook.” www.vietnamam.com (ATI).