Hanoi to control inflation and credit to boost economic growth

Vietnam's premier sets the goals for the country's development in competition with other Southeast Asian economies. Manufacturing is a key sector, especially at a time when many are delocalising from China. The government also plans to restructure banks and state-owned enterprises.

Hanoi (AsiaNews/Agencies) - Vietnam's Prime Minister Nguyen Tan Dung pledged to bring inflation down to a decade low in order to boost foreign investment and cope with the aftermath of a credit boom that has hobbled the banking industry. He wants to maintain the country's competitive edge and benefit from delocalisation, especially in manufacturing, from mainland China to emerging economies in Southeast Asia.

"Inflation in 2012 will be about 7 per cent," Dung said, and "next year we will have even better control of it, at about 6 per cent." Overseas investment should also rise "sharply".

Yet, the government has to keep an eye on strikes and workers' protests because they threaten its investment goals in manufacturing. This feeds fears of lower growth after 25 years of market liberalisation and development.

The nation of 89 million is expected to see the economy expand by 5.5 per cent next year, slightly higher than this year's 5.2. Although enviable by Western standards, the latter is the weakest performance in 13 years, which averaged 7 per cent a year.

For analysts and experts, the government also has to clean up the banking system and keep a tight rein on state companies to control inflation at a time of slow growth.

As its banking crisis deepened in the past year, Vietnam's stocks have underperformed. The VN Index of shares is down about 0.7 per cent over the period, compared with the MSCI Asia Pacific Index's (MXAP) advance of 9.4 percent.

Prime Minister Nguyen Tan Dung is well aware of the situation and is "determined to restructure its banking system at the lowest cost possible, to prevent any systemic collapse".

Meanwhile, the ruling Communist Party has decided to restructure state-owned companies as one of its main areas of focus through 2015.

A more stable economy should help boost foreign investment next year and in 2014, he said. The government's open door policy vis-à-vis "foreign companies" that want to invest and take part in the process of restructuring is expected continue.