News / Economy

UNDP Chief: Economic Reforms Key to Vietnam Development

FILE - Clients sit in a branch of the Bank for Investment and Development of Vietnam (BIDV), Hanoi.
FILE - Clients sit in a branch of the Bank for Investment and Development of Vietnam (BIDV), Hanoi.
A top United Nations official has called on Vietnam to open its partly state-run economy to more competition.

Helen Clark, head of the U.N. Development Program and a former prime minister of New Zealand, said in Hanoi late Monday that if Vietnam is to make progress economically, it needs to prioritize reform.

“I also come from a country which had a very, very large state sector of the economy,” Clark said. “And over the years, some of that was privatized, some of it was made very competitive.”

As with China, Vietnam has been facing pressure to scale back its powerful state-owned enterprises, which critics say have inefficient management, lower profits than private companies, and unfair access to loans from state-run banks. That, in turn, has contributed to a high rate of loans that end up in default.

Economist Le Dang Doanh said the government recognizes that these state firms are weighing down the banking sector and therefore the economy as a whole.

“The state-owned enterprises are very important because they own a lot of assets; they use a lot of credit from the banking system,” Doanh said. “But they also have low efficiency.”

In response, Vietnam has promised to privatize more than 400 state-owned companies in the next two years and restructure others. Doanh said these companies would benefit from the knowledge of foreign partners by forming joint ventures.

Some high-profile delays have skeptics wondering whether authorities can overcome the interest groups that benefit from keeping enterprises under state control.

“There are always vested interests in the economy, particularly where there have been monopolies or near monopolies,” said Clark, who is the first woman to take charge of the UNDP.

She said that if Vietnam moves toward more competition in the economy, consumers would benefit through better prices and innovation.

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