Sinking oil output should make Vietnam focus on tourism for economic growth: deputy PM

Vietnam needs to stop relying on crude oil and focus on tourism to ensure its economic growth, Deputy Prime Minister Vuong Dinh Hue said at an ongoing meeting of the legislative National Assembly on Tuesday.

Hue said that mining output of fossil fuels has been falling for the past two years, local media reported.

Data from the General Statistics Office (GSO) showed that the mining sector slowed by 8 percent on-year in the first nine months, and crude oil output during that period fell 10.3 percent to 11.7 million tons.

In a bid to reach its economic growth target of 6.7 percent for 2017, the government in early June floated fresh plans to tap more oil and gas, despite warnings from lawmakers of becoming over-reliant on the mining industry to fuel growth. The government had planned to exploit 13.28 million tons of crude oil this year, down 3 million tons compared to last year,

“But even when we want to exploit more crude oil to ensure growth, we can’t," Hue said on Tuesday. "This means we have to move our oil rigs further out to sea where there is less crude oil. There is just no way we can depend on crude oil to boost economic growth,” he said. 

“It is better to welcome 1 million tourists than trying to find 1 million tons of crude oil because tourism is more eco-friendly and safe for the economy.” 

To prove his point, Hue said tourism played a key role in the country’s economic growth of 6.41 percent during the first three quarters of the year.

According to the Vietnam National Administration of Tourism, the country earned VND376 trillion ($16.5 billion) in tourism revenue in the first nine months, a 26.5 percent increase from last year, after welcoming 9.45 million foreign visitors and 57.9 million local tourists, up 28.4 percent and 10.3 percent respectively.

The deputy PM said that tourism has a direct impact on the service sector, so more tourists means higher  growth.

The service industry expanded 7.25 percent in the first three quarters, the strongest growth recorded across all sectors, according to the General Statistics Office.

Late last month, the Asian Development Bank cut Vietnam's growth forecast this year to 6.3 percent from its previous projection of 6.5 percent.

The Manila-based lender said it had trimmed the projection due to weak mining output.

Growth prospects are likely to hold up fairly well in the second half, though continued contraction in mining will drag on the economy, it said in its Asian Development Outlook Update 2017.

Foreign direct investment, exports, credit growth, agriculture and government efforts to speed up the implementation of public infrastructure projects are the main factors that will drive economic growth in the last six months, the report said.

The ADB's latest growth forecast matches the projections made by the World Bank and the International Monetary Fund. In July, HSBC lowered Vietnam’s economic expansion forecast this year to only 6 percent from its previous estimate of 6.4 percent.

All of them are below the government’s target of 6.7 percent, a goal that some experts have said is unrealistic.

However, the country has been working hard to realize this target.

Earlier last month, the government instructed the Ministry of Finance to put on hold a series of proposed tax hikes to make life easier for local businesses and the growth target more achievable. The ministry had been planning to increase a number of different taxes and fees, including raising VAT from 10 percent to 12 percent.

The central bank in July reduced its lending interest rate by 0.25 percent to 6.25 percent for the first time in three years to boost economic growth, as many Vietnamese companies still rely heavily on bank loans.