Unsound fundamentals

Inflation. Trade deficit. Budget deficit. These are not new buzzwords but these days they are often seen or heard in local media as lawmakers are delving into the persistent problems facing the Vietnamese economy.

Vietnam must have been lauded for its solid growth though other economies are still struggling in the aftermath of the global financial crisis. And its gross domestic product is predicted to expand 6.7%, a rate which many other countries are dreaming of, but risks for the national economy still exist.

The obsession with inflation is deep and widespread. The trade deficit is ballooning. The budget deficit is all the more worrisome. All these serious problems, according to an editorial published in Thoi bao Kinh te Saigon this week, boil down to lack of efficiency in budget earnings and spending.

National Assembly deputies – who are debating the country’s social and economic performance at their year-end meeting in Hanoi – have taken issue with the budget revenues and expenditures this week. They refer to the state-owned Vietnam Shipbuilding Industry Group, better known as Vinashin, as a pricey lesson to learn to improve the supervision of budget earnings and spending.

Lawmakers are quick to point out lack of transparency in public spending and revenue. Deputy Trinh Thi Nga of Phu Yen Province says there are loopholes to be exploited in budget revenues and expenditures. The purse strings need to be tightened when it comes to holding conferences and receptions, she says, adding stricter regulations should be adopted to reduce unnecessary money-consuming meetings. Danh Ut, a deputy of Kien Giang Province, seconds Nga’s view, saying officials should meet less to cut down on spending. “The Government needs to instruct officials at both central and local levels to cut meetings.”

Another deputy, Nguyen Ngoc Dao of Hanoi City, criticizes lavish spending on a host of festivals, saying it is time to encourage the private sector’s involvement in organizing festivals to spare public spending.

He says people are left in the dark about how state money is spent. “We spend (money) but how it is spent is unknown. I have been serving as a National Assembly deputy for almost 10 years but have not seen a single provincial report on spending.” The efficiency and transparency questions are not yet adequately addressed, he says, and this is why some people in the legislature have yet to have full knowledge of the Vinashin situation.

Stressing the matter of transparency, Nguyen Minh Thuyet, a vocal deputy of Lang Son Province, says the 56.7% proportion of public debt in GDP as put by the Government is dubious. But an economist projects the figure at a staggering 70% based on international calculation practices, he says, requesting the Government to have a detailed report on the public debt, reports Thanh Nien.

Deputy Nguyen Ba Thuyen of Lam Dong Province shares Thuyet’s critical view and underlines the need to set a safety threshold at 30%, 40%, 50% or 60% for public debt. Meanwhile, deputy Mai Thi Anh Tuyet of An Giang Province goes farther when she questions how the country is able to efficiently absorb capital and pay debt. “We cannot assume that Vietnam is financially sound while it’s mired in a challenging situation.” Public debt has grown steadily, from 33.8% in 2007 to 36.2% in 2008 and 41.9% in 2009, and it is forecast to leap to 44.6% this year, she says, and the 50% safety threshold is just self-imposed. However, Minister of Finance Vu Van Ninh, speaking at the National Assembly, says there is no need to make a big fuss about public debt as it is still safe.

But Tuyet urges the Government to make expenditures sensible, continue restructuring the state corporate sector, enforce discipline in public investments to ensure thrift, efficiency and quality, and just fund projects of great significance.

Proposing measures for the Government to keep public debt in check, Nguyen Minh Thuyet says, budget discipline must be strictly enforced and only profitable projects can be implemented. Some other deputies request the Government to suspend all expenditures planned for state-owned corporations and groups of companies to do business so that it can focus resources on the social safety net.

Although the economy is muddling along through many challenges such as the corporate sector’s difficult access to bank loans caused by high interest rates and the depreciation of the Vietnamese dong that hits both importers and foreign-material-reliant exporters, the Government projects a budget revenue rise of VND58.6 trillion this year. While some deputies have praised the Government for this, others have cast doubt over it.

Skeptical about the budget income increase, deputy Nguyen Ba Thuyen of Lam Dong Province is quoted by Nguoi Lao Dong newspaper as saying, “Vinashin racked up losses of VND2.6 trillion within two years but no one knew about that. There have been instances where provinces keep budget revenue estimates artificially low so that at the end of year, they can take pride in higher-than-expected results. In worse cases, they may sell land or forward tax revenue from one year to another to turn out good figures.”

All the above concerns raised by National Assembly deputies are understandable because their ultimate goal is to ensure the economy is stable with sustainable growth and sound fundamentals as stated in the Thoi bao Kinh te Saigon editorial.