Nguyen Quang Thai, a professor at the Viet Nam Economics Science Association, told newspaper Dai doan ket (Great National Unity) about the progress made towards restructuring public investment.
The process of restructuring public investment was implemented two years ago. What are your assessments of the process?
If we compare it with the restructuring process of State-owned enterprises (SOEs) and that of the credit organisations, I would say that the results of the restructuring of public investment are much better. The percentage of public investment in the following year has reduced considerably compared with that of the previous year.
For example, in 2012, it accounted for between 39.5 and 40.3 per cent of the total investment of the entire society. And in the present period, it is about 30 per cent.
I would say that the public investment environment has undergone a lot of changes following the issuance of the Prime Minister's Instructions 1792. The document stated that public investment projects would only be started if they are assured of sufficient funding, be it from the State budget, government bonds or Official Development Assistance (ODA).
This requirement has forced the provinces to think carefully about which projects to choose from among a list of waiting investment projects.
Will you please elaborate further on the requirement stated in the PM's Instructions?
Regional economic development remains a weak point in Viet Nam. Under our budget law, the provincial or city authority has the right to make their own decision on how to utilise the funds that they have been allocated from the State budget. That's the reason why many coastal provinces have spent a lot of money on building sea ports and even airports. However, in reality, the productivity of these sea ports and airports is under their designed capacity. And worse still, some projects cannot be completed due to the shortage of funds.
In my opinion, authorities in neighbouring provinces should get together and create an economic region in order to aggregate their strengths. That is the only way we can maximise our limited resources, particularly capital resources, and avoid fragmented public investment.
The Cat Linh-Ha Dong urban elevated train project is about to be completed next year. However, it is estimated that the construction cost will surpass the original cost of about $399 million. What do you think of that?
The actual cost of a project in our country is always much higher than the estimated cost. But nowadays, thanks to legal requirements on information disclosure, people have better access to information.
I would say that the losses in capital construction, particularly in public investment, are a big problem. To prevent such a huge loss, it is imperative to have the involvement of the political system.
Many localities are allowed to issue bonds to raise funds to finance some public investment projects. What do you think about that?
That's too risky. If the local authority is allowed to issue five-year bonds, when the bonds mature, we are the ones who will have to pay back the money.
Do you think that losses in investment and the inefficient use of the ODA are the reasons for putting public investment in the red?
Everyone knows that Viet Nam's public debt is huge. However, the Ministry of Finance keeps saying that our public debt is still within the safety benchmark (less than 65 per cent of the GDP).
Public debt in our country has increased rapidly in the past five years. It has jumped from $50 billion to $100 billion in the past five years! To pay back bad debts, the government has to issue government bonds with interest rates ranging from 8 to 9 per cent per year—a way of borrowing money from the bond buyers.
We also borrow money from foreign countries (through the ODA), but the interest rate is, on average, 2.5 per cent per year. So with some of the $50 billion in bad debt, and if we borrow money from other countries, we have to pay $1 billion per year. However, with government bonds, we have to pay $4 billion per year. — VNS