Government policies to curb
inflation are on the right track, according to Planning and Investment Minister
Vo Hong Phuc in an interview with the Tuoi Tre (Youth) newspaper.

The country has a relatively high Incremental Capital Output Ratio (ICOR). Does
that indicate a lack of production efficiency?

There
are two reasons for this worth considering. The first is that Viet Nam is a
developing country. It needs to develop its infrastructure and alleviate
poverty. However, poverty alleviation is only of long-term sustainable
development value. Therefore, it would be wrong to look solely at the country’s
high ICOR. Instead, we need to look closely at those areas where the ratio is
high and decide whether something needs to be done about it. It is true that
there are problems which need to be fixed. For instance, investment by
State-owned enterprises needs to be carefully looked at.

The
State budget is invested mainly in developing infrastructure. We need to
determine whether the State budget is being poorly controlled, and if so,
whether that is due to a failure to formulate realistic State budget estimates
or because of poor management.

Ministries are given the authority to approve budget estimates for projects. The
Ministry of Transport, for instance, is responsible for transport projects,
while the Ministry of Construction is in charge of civil and industrial
projects. However, this approach is not objective enough. In future we must find
ways to ensure investment is closely supervised and effectively used. To achieve
that, we must encourage the private sector to invest in public private
partnership programmes. The private sector will be more effective in investment
supervision.

Numerous financial experts have said that tighter fiscal and public investment
policies were needed from the beginning of this year to curb inflation. What is
your view on that?

We have
already cut down on public investment. Regarding the State budget deficit, we
are trying to keep overspending at 5 per cent of the GDP (the National Assembly
approved 5.3 per cent this year). In addition, the Government has only issued
G-bonds worth VND45 trillion (US$2.3 billion). The NA earlier proposed VND63
trillion ($3.2 billion).

Only the
most urgent projects will get funding from the State budget and money raised
from G-bonds to boost efficiency. The Ministry of Planning and Investment will
re-examine future investment projects in the near future.

It has also been claimed that inconsistent macro-economic policies have had a
negative impact on the market?

In all
fairness, the Government has tried to issue consistent fiscal policies. The
thing is, these policies need to be harmoniously executed throughout the year.
There have been instances where fiscal policies have impacted negatively on the
macro-economy, particularly around the end of the year and into the next year.
The Government has sometimes reined-in the economy too much or too little.

However,
the Government has co-ordinated with relevant ministries when putting forth new
policies, with a view to increasing macro-economic stability and curbing
inflation.

What specific measures will the Government be taking regarding development and
the State budget?

The
measures the Government plans to take have been set out in Resolution 02
regarding the implementation of its socio-economic development plan and its
State budget estimate for this year. Ministries are putting forward policies to
implement these measures. In my opinion, inflation will be contained if these
measures are effectively implemented. For instance, the State Bank of Viet Nam
should act on its own initiative when trying to ensure there is enough liquidity
in the banking system, which will help to curb inflation. The Ministry of
Finance, meanwhile, will co-ordinate with relevant offices when putting the
finishing touches to new regulations on price management.

VietNamNet/Viet
Nam News