During the opening day of the 7th session of the 12th National Assembly, officials pointed out weaknesses of state owned corporations in regulating the market as well as inefficient usage of national capital, assets and land.
The 7th session of the 12th National Assembly began on May 20 (Photo by Viet Hung)
As part of his socio-economic report, Deputy Prime Minister Nguyen Sinh Hung shared that the Vietnamese economy was recovering with a growth rate of 5.83% in the first quarter which is higher than same period of 2009 as well as last year's average. Export volume in the first quarter rose by 8.9% compared to last year.
Consumer Price Index (CPI) of the first four months in 2010 increased 4.27% compared with last December. Gold prices rose 41.6% compared to last year.
After the State suspended its economic stimulus packages, lending interests rates became high and created obstacles for enterprises, especially small and medium sized, to access capital sources. The financial system of banking, securities, and insurance is not really healthy, lacks transparency and publicity, and contains risks.
The Deputy Prime Minister acknowledged that state owned enterprises, joint stock commercial banks and trading organisations are faced with many management challenges. Several state owned corporations play important roles in regulating the market but they did not complete their mission in the right manner and wasted national capital, assets and land.
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| Deputy Prime Minister acknowledged some limits of the Government’s macro-management (Photo by Viet Hung) |
Hung said, “The Government did not issue timely policies on managing foreign currency, gold and real estate markets nor did it effectively to control prices of some commodities.”
The Government failed to achieve a high level of effectiveness in dealing with urgent social issues such as deforestation, forest fires, natural resource waste, environmental pollution, food safety, traffic accidents and congestion, education and health care quality.
The report highlighted 7 key duties of direction and management with an aim of completing missions and objectives set forth for 2010. They are macro-economic stability, inflation control, solid economic growth recovery, achieving targeted Gross Domestic Product (GDP) of 6.5%, ensuring social security, rapid and sustainable poverty reduction, speeding up administrative reform and operation efficiency improvement.
More weaknesses pointed out by the National Assembly
The Standing Committee of the National Assembly recognised efforts and achievements of socio-economic management for the first four months of 2010, however, they also pointed out additional weaknesses and limits of the Government.
Over-expenditure of the state budget is too high, equaling 6.9% of the GDP. Also, Government debt is equivalent to 41.9% of the GDP. According to Ha Van Hien, Chairman of the Economic Committee of the National Assembly, although the number did not cross the regulated limit, it is still very high. Capital mobilisation from Government bonds was only 30% of the whole year's target that will cause difficulties in balancing capital sources for ensuring expenditure plans.
The current total payment balance showed a deficit of USD8.8 billion, which is the highest deficit in recent years. This fact puts pressure on foreign currency trading and exchange rates. Monetary fiscal policy has been loosened in order to curb the economic recession but also put tension on prices that may lead to potential high inflation for 2010.
The Economic Committee considers prediction ability as one area of weakness in management when anticipated data is very different than actual figures. The actual state income was VND51.7 trillion ($2.67 billion) higher than estimated, which is equal to nearly 3% of the GDP and half of last year's over-expenditure of the state budget. The actual deficit of payment balance is also USD8 billion higher than the forecasted number, impacting planning ability.
The Chairman of the Economic Committee is worried that a high growth rate of CPI for the first months of the year will be the biggest challenge to control. Interest rates for loans went up 17-18% or even 19-20% per year creating difficulties for enterprises in accessing capital sources. As a result, it will badly affect growth rate in the coming quarters in 2010.
The reason, according to Ha Van Hien, is over-tightened monetary policy which led to a very quick reduction of the total amount of credit debt. Consequently, interest rates increased dramatically. In addition, price increases of essential products such as electricity, coal, water, petrol along with exchange rate amendments occurred within a very short time before Tet. All these factors had brought a remarkable surge to the first quarter’s CPI.
The Committee also consulted solutions to management policies for the second half of 2010. They determined the government should prioritise macro-economic stability maintenance, high inflation control, payment balance betterment and state budge deficit decrease.
A flexible monetary policy must be carried out in late 2010 to maintain credit growth rate and ensure liquidity of the economy. Moreover, it’s necessary to apply appropriate methods to support enterprises such as lending credit at actual interest rate and providing enough electricity for their manufacturing.
The Committee recommended close control of advanced payment from the state budget and thoroughly examining projects requiring a huge investment. Furthermore, they would like to lower the state’s over-expenditure to below 6.2% of the GDP, which is approved by the National Assembly in order to ensure the government debt remains at an acceptable limit.
Prime Minister Nguyen Tan Dung and Minister of Natural Resources & Environment Pham Khoi Nguyen attended the opening day (Photo by Viet Hung)
