Joint winner of the 2004 Nobel prize in Economics, Prof. Finn Kydland.(Source: VNA)Hanoi (VNA) - Joint winner of the 2004Nobel prize in Economics, Prof. Finn Kydland, spoke to Viet Nam News about theVietnamese economy and growth on the sidelines of the 2018 Recontres du Vietnam– a development initiative that has brought world-renowned scientists to Vietnamfor discussions since 1993.
Q: What are your impressions of Vietnam’seconomic growth in recent years?
A: About two years ago I read on Viet NamNews (I think) about the willingness of the Vietnamese Government to letforeign companies set up shop in Vietnam, which I think is a good idea indeveloping economies. In the initial stages, typically an economy doesn’t haveall the skills needed for growth to get momentum. It’s a good way to be willingor receptive to let foreigners become entrepreneurs in a country like Vietnamand they can help get growth going and Vietnamese can learn from them.
Q: What is your view on large State ownedenterprises (SoEs) in economic development?
A: It’s an extremely bad idea. You’ll seethat in China, for example. I think China, with the same use of resources,could have grown substantially faster than it has done and that is in partbecause of the lack of development in the financial and banking sectors.State-owned banks tend to favour the big State-owned companies and I don’tthink bureaucrats are the ones who know which are the best or most promisingprojects. I don’t think they have the expertise or the incentives to identifythe best projects. A market economy potentially works much better because ofthe market incentives to learn how to identify such projects.
Q: Vietnam, not unlike many othercountries, relies on GDP as a single all-powerful indicator of growth. What isyour view on this approach to measure growth?
A: Typically, there are two basiccomponents: consumption expenditures and investment expenditures. In developingcountries, investment expenditures are very important. For example, if a biggerchunk of GDP was consumption then it’s not a good thing for developingeconomies. Successful developing economies have been willing to forgoconsumption, not completely but reduce it below what we call a steady state,and instead devote more of their GDP to investment which allows them to grow faster.In return for giving up consumption today, you’ll get to enjoy more in thefuture than you otherwise would have.
Q: One of the limiting factors of GDP as anindicator of growth is that it often fails to calculate the damage done byeconomic development to the environment. What is your view on this aspect ofGDP?
A: This is a very important point andsomething I have become more and more interested in because I was on a panel toevaluate solutions to climate change, organised by the Copenhagen Consensus. Iwas a part of a conference in May last year on climate change problems whichaimed at breaking down the barriers between macro and micro economics. We tryto bring people who are experts in more micro orientations and some in macro.We are also trying to bring together people with micro aspects and those whowork on national or global aspects of climate change.
Q: Rising public debt has been a hotlydebated topic in Vietnam in recent years. What are your recommendations forpolicy makers to manage this particular issue?
A: I would need to have access to the figures(for specific recommendations) but it is quite common for a country that is atthe early stages of development to accumulate debt, especially when they havethe credibility to borrow from abroad so that they can grow faster by channellingthat borrowing in investment. That’s the way all successful countries startedat the low level, including my home country Norway. Norway used to be a poorcountry in the early 1900s. For a while, maybe 50 years, they relied, to someextent, on borrowing from the rest of the world. They used their borrowing toincrease their capacity in producing and investment primarily and they madeNorway a much more developed country and they managed to pay it back. Now, ifyou are saying that the debt to GDP ratio of Vietnam is getting out of handbecause it has been mostly channelled into consumption then I would say that’sa bad idea.-VNA
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