Economic stability is a pre-requisite to win public confidence, Vo TriThanh, deputy director of the Central Institute for Economic Management,told Ha Noi Moi (New Hanoi) newspaper.
* As aneconomic expert, what do you think to have been the strong points inVietnam's macro economy in the past few years?
Sincethe issuance of Government Resolution 11/NQ-CP in early 2011, Vietnam'seconomic policies have made many changes toward achieving macroeconomic stability.
In late 2011, Vietnam kicked offthe process of economic restructuring. What has happened in the lasttwo years helped the Government understand the bottlenecks causing sloweconomic growth - a key factor leading to the vulnerability of thenation's economy and the imbalance in the macro economy.
Our growth model is basically based on the rapid increase in credit,investment, high transaction fees and the instability of the land andthe capital markets.
Other noteworthy factors are inflation, the State budget deficit and bad debt.
In such a situation, there is no other way for Vietnam than to tighten its macro economy and speed up its policy renewal.
* What has the Government done to put policy renewal in place?
The Government has been proactive in stabilising the macro economy and in restructuring the national economy.
At present, the deposit interest rate is at the lowest level in thepast few years. However, there is still room for the lending interestrate to be further reduced.
I should say that oureconomic restructuring process is on the right track, as the Governmenthas successfully established the Vietnam Asset Management Company(VAMC).
In the meantime, we are on the right pathwith ASEAN economic integration and negotiation of various agreements,including the Trans-Pacific Partnership, the Free Trade Agreement withthe European Union, the Customs Union with Russia, Belarus andKazakhstan, along with other agreements.
What wewant to do is quite a lot, but only a little has been accomplished.Here, I just want to mention the four key objectives we have desperatelywanted to accomplish, but they are still hanging over us.
They are the stabilisation of the macro economy; rational growth rateto ensure social security; restructuring the national economy; anddeepening international integration.
* TheGovernment's 2013 socio-economic assessment says that although our macroeconomy has achieved much progress, that progress is not steady. How doyou respond to that?
We have to concede that inpast years we had to cope with a "chronic problem" - an unstable economycoupled with a high inflation rate, imbalance between imports andexports, the State budget deficit, and others. All these have weakenedour capacity to resist external negative impacts.
Although in recent months, Vietnam's financial credibility has improved,the stability of its macro economy remains fragile.
The instability of the economy, State budget deficit, the slowtreatment of bad debts and the high financial risk all have, somehow,eroded the people's confidence.
So, it is imperativefor the country to have its economy stabilised, and that has alreadybeen reflected in the Government's administration and managementperformance.
To achieve the goal of stabilising theeconomy, since early 2013, the Government has tried to implement allmeasures listed in Resolution 02/NQ-CP, including cutting the interestrate, handling bad debts, tax delays - reductions or exemptions and theexecution of the VND30 trillion (1.4 billion USD) package to lend to lowincome people for buying social housing.
I have a feeling, the burden is now on monetary measures having poor co-ordination with the fiscal policy.
* Do you think this is the most difficult time for Vietnam's economy?
It is projected that the recovery of the world economy in the next fewyears (maybe by 2017) will remain slow and contain quite a fewunforeseeable risks.
For our economy, it is likelythat it will recover in 2015. Some agencies have projected that in 2014,our economic growth rate will be 5.3-5.4 percent, and 5.6-5.8 percentfor 2015 (the Government sets the growth rate of 5.8 percent for 2014and 6 percent for 2015).
Anyway, we have seen thelight at the end of the tunnel. And now it is time for Vietnam to doubleits efforts to restructure its economy.
* At theyear-end meeting, the National Assembly approved the Government'srequest to increase the State budget deficit ceiling for 2013 and 2014.In your opinion, what are the reasons behind the request?
It was not accidental at that full house meeting, the Government askedthe National Assembly to increase the State budget deficit ceiling. Asin 2013, the State budget deficit was set at 4.8 percent. However, bySeptember it was already at 5.4 percent of the GDP.
The Government also requested lawmakers to increase the State budgetdeficit cap of 4.8 percent to 5.3 percent of the GDP in 2014.
At the same time, it also requested to increase the issuance ofGovernment bonds - 160 trillion VND (7.6 billion USD) in the three yearsfrom 2014-16, to help address the constraint in the State budget and tocomplete the national infrastructures.
However,the increase in the State budget deficit and issuance of governmentbonds requires us to have very specific mid-term goals and highcompliance in the budget rules, as well as a clear road map on thereduction of the budget deficit in the following years.
In addition, it requires a very comprehensive assessment on the impacton economic stability, inflation, public debt and co-ordination betweenthe credit policy and the exchange rate. What's more important, is thatpublic investment programmes must achieve the goal of high efficiency.
* What are the measures to solve the problem of bad debts?
Everyone understands that the issue of serious bad debt is theconsequence of the macro policy that chased after the high growth rateat "all costs", coupled by the loosening of financial surveillance, poorrisk management and planning of quite a number of enterprises.
The VAMC is simply a tool, although its main mission for itsestablishment is to handle existing bad debts. However, it is not amagic wand. In my own opinion, bad debts are the high cost that the bankowners have to pay for their poor performance and weak management.
I agree that the Government's interference is necessary, but it should be minimum.-VNA
* As aneconomic expert, what do you think to have been the strong points inVietnam's macro economy in the past few years?
Sincethe issuance of Government Resolution 11/NQ-CP in early 2011, Vietnam'seconomic policies have made many changes toward achieving macroeconomic stability.
In late 2011, Vietnam kicked offthe process of economic restructuring. What has happened in the lasttwo years helped the Government understand the bottlenecks causing sloweconomic growth - a key factor leading to the vulnerability of thenation's economy and the imbalance in the macro economy.
Our growth model is basically based on the rapid increase in credit,investment, high transaction fees and the instability of the land andthe capital markets.
Other noteworthy factors are inflation, the State budget deficit and bad debt.
In such a situation, there is no other way for Vietnam than to tighten its macro economy and speed up its policy renewal.
* What has the Government done to put policy renewal in place?
The Government has been proactive in stabilising the macro economy and in restructuring the national economy.
At present, the deposit interest rate is at the lowest level in thepast few years. However, there is still room for the lending interestrate to be further reduced.
I should say that oureconomic restructuring process is on the right track, as the Governmenthas successfully established the Vietnam Asset Management Company(VAMC).
In the meantime, we are on the right pathwith ASEAN economic integration and negotiation of various agreements,including the Trans-Pacific Partnership, the Free Trade Agreement withthe European Union, the Customs Union with Russia, Belarus andKazakhstan, along with other agreements.
What wewant to do is quite a lot, but only a little has been accomplished.Here, I just want to mention the four key objectives we have desperatelywanted to accomplish, but they are still hanging over us.
They are the stabilisation of the macro economy; rational growth rateto ensure social security; restructuring the national economy; anddeepening international integration.
* TheGovernment's 2013 socio-economic assessment says that although our macroeconomy has achieved much progress, that progress is not steady. How doyou respond to that?
We have to concede that inpast years we had to cope with a "chronic problem" - an unstable economycoupled with a high inflation rate, imbalance between imports andexports, the State budget deficit, and others. All these have weakenedour capacity to resist external negative impacts.
Although in recent months, Vietnam's financial credibility has improved,the stability of its macro economy remains fragile.
The instability of the economy, State budget deficit, the slowtreatment of bad debts and the high financial risk all have, somehow,eroded the people's confidence.
So, it is imperativefor the country to have its economy stabilised, and that has alreadybeen reflected in the Government's administration and managementperformance.
To achieve the goal of stabilising theeconomy, since early 2013, the Government has tried to implement allmeasures listed in Resolution 02/NQ-CP, including cutting the interestrate, handling bad debts, tax delays - reductions or exemptions and theexecution of the VND30 trillion (1.4 billion USD) package to lend to lowincome people for buying social housing.
I have a feeling, the burden is now on monetary measures having poor co-ordination with the fiscal policy.
* Do you think this is the most difficult time for Vietnam's economy?
It is projected that the recovery of the world economy in the next fewyears (maybe by 2017) will remain slow and contain quite a fewunforeseeable risks.
For our economy, it is likelythat it will recover in 2015. Some agencies have projected that in 2014,our economic growth rate will be 5.3-5.4 percent, and 5.6-5.8 percentfor 2015 (the Government sets the growth rate of 5.8 percent for 2014and 6 percent for 2015).
Anyway, we have seen thelight at the end of the tunnel. And now it is time for Vietnam to doubleits efforts to restructure its economy.
* At theyear-end meeting, the National Assembly approved the Government'srequest to increase the State budget deficit ceiling for 2013 and 2014.In your opinion, what are the reasons behind the request?
It was not accidental at that full house meeting, the Government askedthe National Assembly to increase the State budget deficit ceiling. Asin 2013, the State budget deficit was set at 4.8 percent. However, bySeptember it was already at 5.4 percent of the GDP.
The Government also requested lawmakers to increase the State budgetdeficit cap of 4.8 percent to 5.3 percent of the GDP in 2014.
At the same time, it also requested to increase the issuance ofGovernment bonds - 160 trillion VND (7.6 billion USD) in the three yearsfrom 2014-16, to help address the constraint in the State budget and tocomplete the national infrastructures.
However,the increase in the State budget deficit and issuance of governmentbonds requires us to have very specific mid-term goals and highcompliance in the budget rules, as well as a clear road map on thereduction of the budget deficit in the following years.
In addition, it requires a very comprehensive assessment on the impacton economic stability, inflation, public debt and co-ordination betweenthe credit policy and the exchange rate. What's more important, is thatpublic investment programmes must achieve the goal of high efficiency.
* What are the measures to solve the problem of bad debts?
Everyone understands that the issue of serious bad debt is theconsequence of the macro policy that chased after the high growth rateat "all costs", coupled by the loosening of financial surveillance, poorrisk management and planning of quite a number of enterprises.
The VAMC is simply a tool, although its main mission for itsestablishment is to handle existing bad debts. However, it is not amagic wand. In my own opinion, bad debts are the high cost that the bankowners have to pay for their poor performance and weak management.
I agree that the Government's interference is necessary, but it should be minimum.-VNA
