SOEs may cease to be the engine of the national economy if they don't speed up restructuring. Phung Duc Kien, National Assembly Deputy, tells Thoi bao Kinh te Viet Nam (Viet Nam Economic Times).
Why was public debt such a hot topic at the November National Assembly meeting?
At present, our public debt is equivalent to 64 per cent of the nation's GDP. It's at an alarming, though still permissible level. If we compare our public debt with that of other countries like Japan or USA, ours is still lower.
However, the nature of their public debt is different from ours; they are largely long term debts with low interest rates. Their economies are also in better condition than ours, so their capacity to pay off debt is better than ours.
In Viet Nam, most of our public debt is made up of mid-term debts with high interest rates and our capacity to pay off the debt is limited due to the weakness of our economy. To generate enough money to pay off these debts we have to, ironically, continue to borrow money. As a result, debts will continue to multiply and the situation will become uncontrollable.
What's your opinion about the recent measures the government took to reign in the public debt?
Sorry, but I feel uneasy about these measures. To get the public debt to a safe level, we have to increase our capacity to pay off these debts by generating more profits. However, our economy mainly depends on subcontracted work and agricultural products. That's why the profit margin remains very low.
To improve the situation, the government should focus on measures to raise production capacity, improve product quality and efficiency as well as the competitiveness of the national economy.
According to a report from the Ministry of Finance, at present, 98 per cent of the public debt comes from investment in infrastructure development, not in production development, quality and efficiency of the products, nor the competitiveness of the economy.
Imagine if more of that investment money is spent on development research in the fields of agriculture, fisheries or hi-tech and support industries. I'm pretty sure that would generate quite a lot of commodity value, and would provide services to and employ millions of people. As a result, our national defence and the health of our economy would be strengthened.
In my opinion, the government should reconsider and adjust the public investment structure by cutting down spending on infrastructure projects so that there's more money to invest in development projects. This is a practical way to increase production capacity and to improve the competitiveness of our economy.
What's your opinion about the ongoing restructuring of state owned enterprises (SOEs)?
Our SOE restructuring process is moving at a snail's pace. When people talk about public debt, they often say the culprits are the SOEs.
The 2013 Constitution reiterates that the state economy is the mainstay of the national economy. However, at present state-owned groups and corporations have not satisfied their three main duties. First, they should act as the motor behind production development. Secondly, they are tasked with improving the competitiveness of the economy. Lastly, they are supposed to increase their capital contributions to the state budget.
They also have yet to contribute to the formation of a new growth model for the nation. If this situation is not improved, I'm afraid to say that the SOEs will not be able to live up to the 2013 Constitution's words, the mainstay of the economy.
What about the restructuring process of our banks and bad debt settlements?
Similar to the SOEs, the restructuring of commercial banks is also moving very slow. Many joint stock commercial banks have small capital resources and poor services. It's high time for Viet Nam to think about following the model of an amalgamated bank.
As for the bad debts, the State Bank of Viet Nam should develop specific and accurate criteria that is honest about the nature of bad debts.
I'm sorry to say our current standards by which we judge and settle bad debts have not been effective. A case in point, the Viet Nam Asset Management Company (VAMC) just buys or collects bad debts from banks to help make their financial balance sheets more "beautiful." — VNS