Vietnam - ‘Put inflation above growth' say deputies

National Assembly lawmakers are urging the Government to redouble its efforts to bring inflation back down to single-digit levels, even if it means sacrificing a high economic growth rate in 2012.

The call was made by deputies during discussions yesterday.

"It's not necessary to increase the rate of growth in gross domestic product (GDP) to 6 or 6.5 per cent next year," said deputy Mai Huu Tinh who represents the southern province of Binh Duong. "The far more important task is lowering the annual inflation rate to below 10 per cent."

This year's inflation rate is now expected to exceed 18 per cent, compared to an already-high 12 per cent last year.

GDP is expected to grow this year by 6 per cent, below last year's rate of 6.78 per cent. Growth averaged 5.43 per cent in the first quarter, 5.67 per cent in the second quarter, and 6.11 per cent in the third quarter of this year.

Deputy Truong Minh Hoang from Ca Mau Province said the Government should even accept an even lower economic growth next year in order to tackle inflation, which HCM City's deputy Tran Du Lich called "the number one target."

"If double-digit inflation continues in 2012, all the economic achievements the country has gained over many years will vanish into thin air," said Lich.

Tinh said many small- and medium-sized enterprises (SMEs) were now close to shutting down. The high rate of inflation and high interest rates have resulted in a rising number of bankruptcies among SMEs –

which account for 95 per cent of enterprises in Viet Nam.

"They won't be able to survive long if interest rates stay above 15 per cent per year and inflation over 10 per cent," he said.

The consumer price index, meanwhile, reached a peak in April of this year, but has since declined gradually.

While implementation of Government Resolution No 11, issued in February, has been credited with easing inflationary pressures, Lich nevertheless called for a comprehensive assessment of the side effects of the policies.

"Whether inflation has eased because of stricter monetary policies or lower purchasing power, we are faced with a possible repeat of the 2008 situation," he warned.

Resolution No 11 required a rollback in State spending, yet spending nevertheless rose by 15 per cent this year.

"This badly needs a re-think," Lich said.

Deputy Tran Van Minh from Quang Ninh Province said State investment has lacked focuses and been inefficient. Viet Nam's Incremental Capital Output Ratio (ICOR), which determines the efficiency of investment and is calculated by dividing annual investment by annual increase in GDP, demonstrated this weakness, Minh said.

The country's ICOR is now 6.3 per cent, up against 5.1 per cent in the 2000-05 period, and much higher than the regional average of 4.5 per cent.

"The Government needs to be brave to cut investment and only retain investment in the most efficient fields," said Minh.

Lich said that State investment needed to be reformed so that it would be "a tool to stimulate investment from the private sector."

Investment in agriculture and rural development, meanwhile, needed to be increased, argued many deputies.

Public debt has also been forecast to reach nearly 60 per cent of GDP this year, and while he agreed that a certain level of public debt – particularly that represented by loans received under official development assistance (ODA) – was essential for economic development, Lich doubted that current debt levels were safe.

"Indicators such as investment efficiency and losses have to be taken into account when deciding the safe level of public debt," he said. "When the country is inefficiently absorbing investment due to poor project management, there's no point in pumping in more money." Inefficient investments had been made in both the state and non-state sectors, he said.

Ideas collected from voters

Nguyen Duc Khoa, 76, from Ha Noi: At the discussion, some deputies proposed to review lists of investment projects and cut public investment and prioritise traffic infrastructure development. I think this is reasonable because poor traffic infrastructure in some big cities like Ha Noi and HCM City is one of the reasons behind existing congestion problem. Besides, well-developed traffic infrastructure would help different areas to link with one another and explore their potential and strength.

Ta Ngoc Huyen – lecturer at Ha Noi-based Banking Academy: Restructuring the national economy is an urgent task. It is time for the country to focus on the quality of growth rather than quantity and it should be based on efficiency, productivity, quality and giving a competitive edge of the economy.

Vo Truong Thanh – Director of Truong Thanh Wood Company in Binh Duong Province: The Government has urged local people to use made-in-Viet Nam products to promote domestic production and reduce the trade deficit, but a number of businesses keep importing products for sale, leading to a trade imbalance and causing losses for the economy.

Ly Ngoc Minh – Director of Minh Long I Ceramic Company in Binh Duong Province: The State should be stricter in economic management, particularly banks' interest rates because they are an important resource which encourage businesses to invest in production and exports, creating surplus value for the economy, contributing to stabilising the market, ensuring social security for 2011 and the years to come.

Le Khang – businessman from the Mekong Delta city of Can Tho: One of the reasons leading to current high inflation is that the State failed to fully utilise businesses, particularly State-owned businesses, in supply, ensuring basic necessities for business and the community as well as failing to effectively use available materials. The Government should continue to increase levels of equity in State-owned businesses and have measures to provide capital support for small – and medium-sized businesses.

VNS

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