Vice Chairman of the National Assembly’s Economic Committee Nguyen Duc Kien spoke about economic restructuring in an interview with Nhan Dan (People) newspaper ahead of the 2014 Autumn Economic Forum.
*In the areas of economic restructuring, public investment, State-owned enterprises and credit institutions, which do you think has made the most significant progress?
In my opinion, credit institution restructuring has recorded the most significant progress. The first achievement is the establishment of a legal framework. The plan to restructure credit institutions during 2011-2015 was approved by the Prime Minister in March 2012 with Decision 254/QD-TTg, while the overall economic restructuring plan was not approved until February 2013. Thus credit institution restructuring was implemented one year earlier than the overall economic structuring plan. Decision 254/QD-TTg is considered the earliest and most important legal effort to restructure the banking system, opening an avenue to deal with weak banks and provide a roadmap until 2015, under which Vietnam needs to develop a system of large credit institutions with better quality and performance.
Second, we promulgated the Law on Deposit Insurance, amended the Ordinance on Foreign Exchange Control and issued the Decree on Gold Trading Management. With these legal documents, the worst scenarios have been considered. For example, the Law on Deposit Insurance affirmed that even when credit institutions go bankrupt, the depositors’ interest will be ensured by deposit insurance agencies. This helps calm the sentiment of depositors. The Ordinance on Foreign Exchange Control is a fundamental step to rule out foreign currency as a payment instrument for domestic transactions, while the Government’s Decree on Gold Trading Management is a step towards streamlining management of the gold market, removing gold as a means of payment in the economy. Thanks to these measures, stability was re-established in the currency and gold markets, creating a favourable condition for the credit institution restructuring drive. Risks were reduced and credit institutions’ safety and liquidity were improved. So far, the most notable success of credit institution restructuring is preventing credit institutions from collapsing, ensuring the country’s monetary security.
*The result of credit institution restructuring is quite obvious. What about SOEs and public investment?
SOE restructuring also saw many successes. In terms of legal documents, we have issued many decrees on enhancing SOE administration, streamlining management of State capital in SOEs and financial management in companies wholly owned by the State. Perfecting the legal framework is an important foundation to accelerate SOE restructuring. However, many laws relating to this issue are still in the making and amendment phases.
Regarding public investment, this sector is only regulated by the Government’s Resolution 11/NQ-CP on measures to curb inflation, stabilise the macro-economy and ensure social security issued on February 2011, and the Prime Minister’s Directive 1792/CT-TTg on strengthening management of public investment from State capital and Government bonds issued on October 2011. Meanwhile the Law on Public Investment was adopted in June 2014, so there has not been a full legal foundation yet to restructure public investment. In fact, the number of public investment projects dropped compared with 2011 but the restructuring has only dealt with simply reducing the number of projects, meanwhile further steps after project suspension have not yet been implemented.
*It is obvious that there are still many problems in the restructuring in these areas. Can you elaborate on what is going to be discussed at the Autumn Economic Forum?
This Autumn Economic Forum will discuss a wide range of issues in these areas because they are strongly correlated. In public investment, we are going to discuss offering investment incentives by region and sector and how these incentives should be provided so that they come in line with international integration commitments. From January 1, 2015, the ASEAN Community will be formed and from January 1, 2018, the WTO’s grace period for Vietnam will end, creating much pressure on the Vietnamese economy. Therefore, we have to collect opinions of experts and administrators on how to offer investment incentives to gain the most benefits. Regarding SOEs, one the goals of SOE restructuring is enhancing their performance, so that more SOEs can take part in the global value chain. The number of SOEs in the global value chain is a gauge of the effectiveness of State capital in SOEs. For credit institutions, we must allow weak banks to go bankrupt and dissolve. Otherwise, bank owners will not be responsible for what they do. We have the Law on Deposit Insurance so we are not afraid that depositors’ interests will be jeopardised.-VNA
*In the areas of economic restructuring, public investment, State-owned enterprises and credit institutions, which do you think has made the most significant progress?
In my opinion, credit institution restructuring has recorded the most significant progress. The first achievement is the establishment of a legal framework. The plan to restructure credit institutions during 2011-2015 was approved by the Prime Minister in March 2012 with Decision 254/QD-TTg, while the overall economic restructuring plan was not approved until February 2013. Thus credit institution restructuring was implemented one year earlier than the overall economic structuring plan. Decision 254/QD-TTg is considered the earliest and most important legal effort to restructure the banking system, opening an avenue to deal with weak banks and provide a roadmap until 2015, under which Vietnam needs to develop a system of large credit institutions with better quality and performance.
Second, we promulgated the Law on Deposit Insurance, amended the Ordinance on Foreign Exchange Control and issued the Decree on Gold Trading Management. With these legal documents, the worst scenarios have been considered. For example, the Law on Deposit Insurance affirmed that even when credit institutions go bankrupt, the depositors’ interest will be ensured by deposit insurance agencies. This helps calm the sentiment of depositors. The Ordinance on Foreign Exchange Control is a fundamental step to rule out foreign currency as a payment instrument for domestic transactions, while the Government’s Decree on Gold Trading Management is a step towards streamlining management of the gold market, removing gold as a means of payment in the economy. Thanks to these measures, stability was re-established in the currency and gold markets, creating a favourable condition for the credit institution restructuring drive. Risks were reduced and credit institutions’ safety and liquidity were improved. So far, the most notable success of credit institution restructuring is preventing credit institutions from collapsing, ensuring the country’s monetary security.
*The result of credit institution restructuring is quite obvious. What about SOEs and public investment?
SOE restructuring also saw many successes. In terms of legal documents, we have issued many decrees on enhancing SOE administration, streamlining management of State capital in SOEs and financial management in companies wholly owned by the State. Perfecting the legal framework is an important foundation to accelerate SOE restructuring. However, many laws relating to this issue are still in the making and amendment phases.
Regarding public investment, this sector is only regulated by the Government’s Resolution 11/NQ-CP on measures to curb inflation, stabilise the macro-economy and ensure social security issued on February 2011, and the Prime Minister’s Directive 1792/CT-TTg on strengthening management of public investment from State capital and Government bonds issued on October 2011. Meanwhile the Law on Public Investment was adopted in June 2014, so there has not been a full legal foundation yet to restructure public investment. In fact, the number of public investment projects dropped compared with 2011 but the restructuring has only dealt with simply reducing the number of projects, meanwhile further steps after project suspension have not yet been implemented.
*It is obvious that there are still many problems in the restructuring in these areas. Can you elaborate on what is going to be discussed at the Autumn Economic Forum?
This Autumn Economic Forum will discuss a wide range of issues in these areas because they are strongly correlated. In public investment, we are going to discuss offering investment incentives by region and sector and how these incentives should be provided so that they come in line with international integration commitments. From January 1, 2015, the ASEAN Community will be formed and from January 1, 2018, the WTO’s grace period for Vietnam will end, creating much pressure on the Vietnamese economy. Therefore, we have to collect opinions of experts and administrators on how to offer investment incentives to gain the most benefits. Regarding SOEs, one the goals of SOE restructuring is enhancing their performance, so that more SOEs can take part in the global value chain. The number of SOEs in the global value chain is a gauge of the effectiveness of State capital in SOEs. For credit institutions, we must allow weak banks to go bankrupt and dissolve. Otherwise, bank owners will not be responsible for what they do. We have the Law on Deposit Insurance so we are not afraid that depositors’ interests will be jeopardised.-VNA
