(VNS) Tran Hoang Ngan, a member of the National Advisory Council on Monetary and Financial Policies, spoke with Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) newspaper about curbing inflation.
In the last two years, Viet Nam has been very successful in curbing the inflation rate, despite slow economic growth. What are your thoughts on the situation?
I should say economic management has received special attention from the government in the short and long term. In an effort to solve the present bottle necks in the national economy; including the prevalence of non-performing loans, limited access to capital for enterprises and the need for tax reductions; the government has issued several emergency measures to help the economy recover.
For the long run, the government has adopted measures to speed up the restructuring of the economy to assist public investment, state economic groups, corporations, commercial banks and the financial market.
Regarding inflation, in 2012 we were successful in curbing the inflation rate to meet set targets for 2013. The inflation rate is still under the control, but remains rather high. Inflationary pressures and instability in the macro economy are still threats to the economy.
Regarding the economic growth rate, it is undeniable that the government has been pro-active in introducing many policies to support economic development. However, in my own opinion, the government's "treatments" will take longer time to take effect.
Between controlling inflation and economic growth, which one do you think it should take priority?
They should be treated equally. As I have mentioned above, inflationary pressure remains high while the economy is still facing many challenges. Many enterprises have stopped producing and declared bankruptcy.
In the last two years, economic growth has failed to meet targets of 5.89 per cent and 5.03 per cent, respectively. In 2013, outlook remains gloomy.
In your opinion, what should the Government do to further jump-start economic development?
I should say one of the key factors in our economic downturn is the reduction in social investment. In 2010; total social investment was 41.9 per cent of GDP, while in 2011; it reduced to 28.5 per cent, of which private sector investment made up only 64 per cent of the target level.
This is the reason why I support the National Assembly's idea to approve the Government's proposal to issue VND 30,000-40,000 billion ($1.4 billion - 1.9 billion) in government bonds each year from 2013 to 2015.
According to the plan, the Ministry of Planning and Investment will provide the criteria and requirements for transparency, for investments using bond money. The National Assembly will make a final decision on the proposal.
What should we do to avoid triggering a high inflation rate?
The Government Resolution 01/ND-CP issued in early 2013 has stipulated five categories of measures to stabilise the economy and control inflation. One of the measure is to impose a tight fiscal policy requiring discipline and close monitoring of the state budget.
At the same time, the Government has also adopted measures to tighten its control of market prices. Of course, to solve this problem, it is very important to have strong and active involvement from the Ministry of Industry and Trade and the Ministry of Finance.
The National Assembly's decisions to reduce the corporate income tax and the personal income tax demonstrate the government's willingness to share the burden with enterprises.
In addition, the government has also adopted a group of measures to enable farmers and rural businesses to have better access to credit.
The enforcement of the Law on Prices is also an effective and practical measure to bring inflation under control. — VNS