Economist Pham Chi Lan talked with the Thoi Bao Kinh Doanh newspaper(Business Times) about shifting the focus of economic growth fromState-owned enterprises to the private sector.
*According to some experts, the Government should pay more attention tosupply side rather than the demand side of the economy. How do yourespond to that?
The Government's priority given tothe demand side has been vividly reflected in the Government's policyto pump more money into society and investment.
As aresult, the ICOR (Incremental Capital Output) ratio has been pushed to ahigh level, making the use of our money less efficient.
In the future, it's true that the Government should pay more attentionto the supply side, especially in the present context where the economyis developing slowly and unsteadily.
That alsomeans improving the business environment, especially for those in themanufacturing, professional services and agriculture sectors. That alsomeans accelerating the equitisation and reformation of state-ownedenterprises and their divestment in non-core businesses.
* The National Assembly approved the decision to extend the budgetdeficit ceiling to 5.3 percent of GDP. Is this contrary to paying moreattention to the supply side of the economy?
To behonest, this goes against the reforms we're striving to achieve. Theissuance of more government bonds is not in line with focusing on thesupply side and could affect our goals to grow in a sustainable manner.
* What are the consequences of lifting the budget deficit ceiling?
Obviously this means public debt increases. Policymakers have beentrying to ensure that public debt stays within reasonable limits butit's still rising.
Also, to calculate public debtin Vietnam, we do not count the debts incurred by State-ownedenterprises and localities. Including these two components means ourpublic debt could well surpass 100 percent. That is an alarming level.
* What's your assessment of the economic outlook for 2014?
This depends heavily on economic reform. If we continue focusing onshort-term goals, for example pumping more funds and hope into thepublic sector to be the engine of growth, then we will continue toexperience problems.
Economic reform means makingsure the public sector can be an effective enabler of growth, usingstate-owned enterprises, state investment and government-ownedcommercial banks as supportive levers of the private sector. They haveto use funds effectively.
To do this, we have toput effective monitoring systems in place, transferring investment fromthe public sector to the private sector. We must have policies to boostthe development of the private sector. We can't repeat our mistakes andcontinue struggling for years to come.
Integral to this is taking money out of non-core investments by State-owned enterprises.
* A large part of reforming public investment involves reforming State-owned companies. How can we do both?
These are closely related: reform of State-owned enterprises andpublic investment. State-owned enterprises absorb a significant amountof public funds and they can initiate many ideas for public investment,which can be seen in many localities.
State-ownedenterprises benefit from these projects. If the Government and theNational Assembly still want to boost growth, that means we needinvestment, but if that continues to come largely from the Government,then we won't be able to cut down on public investment.
* How can we apply market rules?
This means requiring State-owned enterprises to focus onprofit-raising and economic returns, and following the rules of themarket. For now, State-owned enterprises are placing heavy debts onsociety.
We can see that from Vinashin. These debtsdon't disappear. The company only bears part of the debt and the restwill be paid for by society. This is a toxic and malignant problem andit comes from their privileged position in the economy.-VNA
*According to some experts, the Government should pay more attention tosupply side rather than the demand side of the economy. How do yourespond to that?
The Government's priority given tothe demand side has been vividly reflected in the Government's policyto pump more money into society and investment.
As aresult, the ICOR (Incremental Capital Output) ratio has been pushed to ahigh level, making the use of our money less efficient.
In the future, it's true that the Government should pay more attentionto the supply side, especially in the present context where the economyis developing slowly and unsteadily.
That alsomeans improving the business environment, especially for those in themanufacturing, professional services and agriculture sectors. That alsomeans accelerating the equitisation and reformation of state-ownedenterprises and their divestment in non-core businesses.
* The National Assembly approved the decision to extend the budgetdeficit ceiling to 5.3 percent of GDP. Is this contrary to paying moreattention to the supply side of the economy?
To behonest, this goes against the reforms we're striving to achieve. Theissuance of more government bonds is not in line with focusing on thesupply side and could affect our goals to grow in a sustainable manner.
* What are the consequences of lifting the budget deficit ceiling?
Obviously this means public debt increases. Policymakers have beentrying to ensure that public debt stays within reasonable limits butit's still rising.
Also, to calculate public debtin Vietnam, we do not count the debts incurred by State-ownedenterprises and localities. Including these two components means ourpublic debt could well surpass 100 percent. That is an alarming level.
* What's your assessment of the economic outlook for 2014?
This depends heavily on economic reform. If we continue focusing onshort-term goals, for example pumping more funds and hope into thepublic sector to be the engine of growth, then we will continue toexperience problems.
Economic reform means makingsure the public sector can be an effective enabler of growth, usingstate-owned enterprises, state investment and government-ownedcommercial banks as supportive levers of the private sector. They haveto use funds effectively.
To do this, we have toput effective monitoring systems in place, transferring investment fromthe public sector to the private sector. We must have policies to boostthe development of the private sector. We can't repeat our mistakes andcontinue struggling for years to come.
Integral to this is taking money out of non-core investments by State-owned enterprises.
* A large part of reforming public investment involves reforming State-owned companies. How can we do both?
These are closely related: reform of State-owned enterprises andpublic investment. State-owned enterprises absorb a significant amountof public funds and they can initiate many ideas for public investment,which can be seen in many localities.
State-ownedenterprises benefit from these projects. If the Government and theNational Assembly still want to boost growth, that means we needinvestment, but if that continues to come largely from the Government,then we won't be able to cut down on public investment.
* How can we apply market rules?
This means requiring State-owned enterprises to focus onprofit-raising and economic returns, and following the rules of themarket. For now, State-owned enterprises are placing heavy debts onsociety.
We can see that from Vinashin. These debtsdon't disappear. The company only bears part of the debt and the restwill be paid for by society. This is a toxic and malignant problem andit comes from their privileged position in the economy.-VNA
