VietNamNet would like to introduce a talks on this topic, held by Doanh Nhan Sai Gon Cuoi Tuan (Saigonese Entrepreneurs’ Weekend Magazine), in late September. Guests included Research Director of the Fulbright Economic Teaching Program, Dr. Vu Thanh Tu Anh, Luong Van Ly, Vice chair of the Saigonese Entrepreneurs’ Club who is former deputy director of the HCM City Department of Planning and Investment, National Assembly deputy, lawyer Truong Trong Nghia, and three economic experts Phan Chanh Duong, Nguyen Van Son and Huynh Buu Son.
Phan Chanh Duong has traveled throughout the country in recent years to meet many officials of provinces and ministries. He commented that since the State Plan Committee, the extremely important agency which sets forth the country’s development strategy, become the Ministry of Planning and Investment, its function seems to be curtailed into summarizing plans submitted by local governments to report to the central government.
Born in the southern province of Ca Mau, Duong spoke about what happened in his hometown firstly: “The huge Ca Mau Gas-Electricity-Nitrate plant complex is built in Ca Mau already but all neighboring provinces like Bac Lieu, Tra Vinh, Soc Trang, etc. have their own thermo-power plants. These power plants are fueled by coal, imported from Indonesia and Australia. Thus, all provinces want to build deep seaports”.
“Why does each province needs its own power plant? Power can be transmitted to everywhere by the North-South grid. Developing power plants that way is cutting the economy into small bits,” Duong said.
Huynh Buu Son said: “In the old period, when Vietnam maintained the centrally-planned economy, we aimed to build each district into an economic unit, with complete industry-agriculture structure. At that time, the country had 500 districts or 500 economic strongholds.”
Son analyzed: that plan failed because Vietnam did not have sufficient capital for that plan. But many problems have arisen from it, for example the policy to restrict trade. Each economic unit wanted to protect its products, resulted in the big gap of prices for the same product between regions. For instance, the price for cassava in HCM City was 5-6 times higher than that in Pleiku.
If in the old time, “economic units” were districts. Today, they are upgraded into provinces. However, the old thought is still applied. Provinces must have everything so all provinces have sugar plants, cement plants, fertilizer plant and now airports and seaports.
“We have to reconsider an old problem: no province has sufficient capital and the use of capital this way is ineffective. Consequently, the Incremental Capital Output Ratio (ICOR) has soared from 2.5 in the early period of reform to 7-8 at present,” Son added.
As an expert on the Mekong Delta economy, Nguyen Van Son deeply understands this region, particularly issues related to its development plan. “In the past, our development plan was based on the development of 500 districts or 500 strongholds. We learnt it from the form USSR. But now many other plans are designed, which are more costly,” he said.
“The most specific example is the program to build new rural areas, under which each commune has to design their own plans, including land use plan, economic development plan, and the plan to build commune centers which must be at least 15-20 hectares.”
“Compensation for 15-20 hectares of land to build commune hubs is at least VND40 billion ($2 million) so what is the source of capital to build new rural areas? Of around 1,300 communes in the Mekong Delta, 40 percent of them do not have standardized health stations (with minimum area of 1,500sq.m) but all communes have to design the new rural area development plan. The lowest cost for working out such a plan is VND150 million ($7,500) but such plans are not implemented”.
The situation is similar for provincial development plans. Guests said that they had been invited to many seminars which introduced development plans of provinces. There were ridiculous cases that a province is named A, but in its development plan, its name is B or a province that does not have coast but its development plan aimed to develop marine economy.
Nguyen Van Son described: “Provincial development plans are often 100 pages long, including tens of pages about weather, population, world situation, etc. and tens of pages about instructions of central and local governments. The contents on development plans are not much.”
There is a widening gap between real economic activities and development plans of this type, Huynh Buu Son pointed out. “They only make development plans to seek State’s assistance. This is a great waste in terms of time, money and human resources.”
According to Nguyen Van Son, the United Nations’ definition of development plan is the document that shows aspiration of the people and government of a territory to achieve some development goals in a scientific way. “We also follow that definition but most of development plans do not show the people’s aspiration and they are not scientific drafted.”
Lawyer Truong Trong Nghia cited a specific example, the development plan of Binh Quoi – Thanh Da in HCM City. Twenty years ago, this area was defined as a new tourism-urban area. Since that plan was made, all land transactions and construction activities in this area have been canceled. However, this plan has been on paper for many years.
There is a fact that many provinces like huge projects. Recently, they have raced to build power plants, seaports and airports. Luong Van Ly said: “In other countries, the authority to make development plans is very clear. For example, the government is in charge of designing international airport and seaport development plans. In Vietnam, provinces submit their plans to build seaports or airports to the central government for approval. These plans will be gradually ratified.”
“Vung Tau is only 120km from HCM City but local authorities also want to have an international airport. A National Assembly deputy spoke seriously that each province should have a stock market. How will our economic be dispersed with that thought?” Ly questioned?
Ly further analyzed that the most important thing that makes scattered investment is all provinces want to have investment projects in order to achieve the annually targeted GDP growth rate. GDP growth is very important because it is the decisive factor for a province’s achievement.
Former Deputy Prime Minister Vu Khoan said on a dialogue held by the Vietnam Television Station that he has never seen any country that set forth GDP target for provinces.
Nguyen Van Son said that it is strange when Vietnam’s annual targeted GDP is 7 percent but provinces aim to reach GDP growth rate of over 12 percent a year.
“Some provinces work out their GDP goals this way: the compilation group says that last year’s GDP was VND100 billion, so this year the targeted GDP growth will be 12 percent, or VND112 billion. The country’s ICOR is 7, it should be only 6 for our province because we do not have many projects; thus we need VND72 billion of investment capital. That’s done! Very simple,” Son described.
Vu Thanh Tu Anh said that Vietnam has over 100 seaports, 22 airports including 8 international airports while Japan, with $5.5 trillion of GDP has only five international airports and the US, with $14.5 trillion of GDP and a very long coast, has only around 30 seaports. Vietnam also has 18 coastal economic zones, 267 industrial zones, 918 industrial groups, with occupancy rate of only 4, 46 and 26 percent. “These statistics show us how scatter our economy is,” he said.
He pointed out another matter: the government has issued tens of strategic development plans, hundreds of development plans and a lot of programs, schedules, etc. but these plans have no connection to each others. Some of them are even contrary. This is the dispersion of institution.
According to Vu Thanh Tu Anh, the central government must bear responsibility for the dispersion of public investment because the central government must be the conductor who needs to resolutely reject wrong projects submitted by local governments.
All guests agreed that development plans are very important for all economies but not in the way that many provinces in Vietnam do. However, many people do not want to change that because their benefit will be affected.
Lawyer Luong Trong Nghia said low salary paid for civil servants is a significant reason that causes corruption, broken development plans and dispersion of economic resources.
Guests suggested some measures to partly deal with this situation. Luong Van Ly said that experts who involve in compiling development plans must be qualified. “We don’t lack excellent experts, just that they are not used properly,” he said.
Nguyen Van Son suggested that the authority to make and approve development plans must be clearly defined and the process to evaluate and approving development plans must be strict.
Phan Chanh Duong said that the criteria for economic growth of a province should not be GDP growth or the transformation of economic structure from agriculture to industry and service of that province. “We should not think that agriculture is association with underdevelopment. Each province has its own characters and potentials so provinces must develop different ways.”
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