Plans for broader finance sector reform include the development of
the bond market over the medium term as outlined in a government
blueprint in February 2013. Policy actions will involve establishing...
rating agencies, a benchmark yield curve, primary dealer system, and
a legal framework to encourage investment in government bonds by
voluntary pension funds and insurance companies. The government aims
to increase the value of bonds outstanding from 18% of GDP in 2011 to
38% in 2020 and to raise the percentage of bonds held outside banks from
12% to 20% in that period.
As for the SOE sector, the government has committed to issuing
a road map for reform by mid-2013. Implementation will require
interagency coordination as SOE reform cuts across the mandates of
several ministries. Restructuring plans have been approved for 24 large
SOEs, and more such plans are expected, including equitization or
partial privatizations through share offerings if market conditions allow.
Equitization has slowed in recent years (Figure 3.31.12). One goal is to
divest SOEs’ noncore businesses by 2015, as many SOEs have accrued
debts by investing in areas unrelated to their core businesses. The absence
of an overarching regulatory framework for SOE reform could put at risk
the implementation of restructuring plans developed through an ad hoc
approach. For example, support for SOE restructuring will be difficult to
muster until programs are put in place to support and retrain workers
displaced during the shakeup of state firms.
Despite these concerns, Viet Nam has remained an attractive
investment destination in light of its growing working-age population
and low labor costs. This is illustrated by an increase in FDI from Japan
(Figure 3.31.13). Nevertheless, the country faces increased competition for
FDI in Southeast Asia particularly from Indonesia. Viet Nam’s ability
to remain competitive and drive economic growth back up to 7%–8%
will depend in large part on the timely and decisive implementation of
structural reforms to the banking and SOE sectors and the improvement
of other aspects of the business environment.
Indicating the extent of this challenge, Viet Nam’s ranking in the
World Economic Forum’s Global Competitiveness Index fell by 16 places
in the past 2 years to 75th of 144 countries (Table 3.31.2). That puts it
below other larger Southeast Asian economies. Viet Nam scored poorly
on several index components, including infrastructure (95), business
sophistication (100), respect for property rights (113), irregular payments
and bribes (118), and soundness of banks (125).
Sources: Ministry of Finance; ADB estimates.Japan External Trade Organization; ADB estimates
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