"Economic Shield Not to Bar Trade Freedom"

When the state-owned enterprises rush to invest in the financial and stock markets much of their capital is poured into that field leading to the lack of capital in production and business. Therefore, the manufacturing, small and medium-sized, private economic sectors become inferior, which causes imbalance in money and goods. What the Government should do now is to recover economic balance by tightening the control of economic groups.

 

State-owned groups have an edge over other types of companies, that is to focus investment on spearhead fields such as electricity, complicated mineral mining, infrastructure, metallurgy. Such investment will surely protect the economic backbone from speculation. The economic groups should have done so but they, in practice, are unable. As a result, we are short of materials like electricity and cement for production. I am told that we even have to import salt and coal.

 

Big groups are founded in order to compete with foreign companies. However, they turn to compete with each other and with small domestic companies. Figuratively, it is similar to feeding a big flock of geese in the hope that they will help us to drive the hawks away yet we use them to fight against our chickens.

 

Obviously, there is a need of big economic groups that are under the control of the government and be developed to a level suitable to the social bearability. That means the economic groups must follow the economic growth in terms of both number and size. Simultaneously, the Government should be aware of big risks brought by state-run economic groups.

The groups only concentrate on short-run profits without a development strategy, which is their important responsibility assigned by the Government. The Electricity group trades in electricity rather than developing it. The Petroleum group deals in oil and gas instead of developing it. The Postal service and telecommunication group trades in postal service rather than developing it though VNPT is the Government’s best group. In our economy, this is the only group we can trust its quality. However, when there are signs that it starts to establish banks and mobilise savings, I am worried that it begins to deteriorate.

 

 

Japan is not good professional evidence. Particularly, Japan has an obsolete banking and financial system. Japanese banks are big but unprofessional. Japan possesses a lot of money and must keep it in banks. That is why banks in Japan are big. Yet, being big is different from being professional. When talking about investment, Mitsuibank and Sakura bank are mentioned. However, no one refers to Japanese banks as model financial organisations. Korean banks are not mentioned either. Such banks as HSBC, Citibank, Chase Manhattan, or Morgan are among those model banks. Japanese and Korean people own much money but their banking systems are not professional. Japan fell into crisis and recession before 1997 and has not solved this problem for more than 20 years. New Korean President has recently granted amnesty for a list of more than 70 group presidents, including presidents of Daewoo and Samsung.

 

 

Being banned from opening banks, groups turn to found financial companies. So what is the difference between these two types of financial institutions? Financial companies are not allowed to receive non-term deposit and make payment. The issue is to which extent is their (groups’) right of fund mobilisation, not which form they can raise fund. State-run corporations and groups are still able to mobilise fund in many ways such as cross asset mortgage, cross ownership. Investment in economic sectors, which use capital inefficiently, will cause risks for the economy.

 

 

The American used to demonstrate against the fact that the Japanese bought all urban land, especially in Hawaii 15 years ago. The American felt uncomfortable about this matter but the U.S government did nothing. After that, the American bought back the property from the Japanese, even at cheaper price. Therefore, in the world of free trade, one asset can belong to a person today and can belong to another person the other day. Naturally, it should be cautious for the countries of hostility and historical problems. Viewpoint of a country leader is different from that of an economic manager. Therefore, embargoes are born. The concept of economic embargo is very interesting. I do not sell planes to you but you can buy cars freely. The reason is you can drop bombs on me. Whenever we see the American sell the Chinese F16 fighter we must conclude that they absolutely own F51, a protective system. So what for the construction of another protective system? Besides the security reason, it is a guaranty to boost the development of weapon commerce.

 

 

There always exist economic shields but they are not allowed to obstruct free trade. For what reason do foreign companies buy property projects in Vietnam? To sell them to the Vietnamese. So what should the shield be? They cannot sell beyond a specific price or a protective measure for Vietnamese people who have income lower than the global level. Obviously, investors are also worried that no one would buy their properties if they sell them too high. At present, they sell each square metre at US$2,000-3,000 as this price is accepted in the market. Irregular greed and irregulation in management make price a dominant phenomenon. Do not worry that foreign investors will buy all property projects as they do not mean to settle in Vietnam then to sell their properties away.

 

The Government should develop its own property area and maintain a price level as a guidance for foreign companies, namely to intervene in and influence the market. This is the key function of regulation.

 

Generally, privatisation should have its limitation. Being excessive like Russia will create a confusing status, that makes Putin do renationalisation as privatisation could provide negative evidences. It is an issue to privatise at what level and speed suitable for economic growth levels. The Central Economic Institute is responsible for studying and defining appropriate speed or limitation for process of transiting from one economy into another economy. It is easy to say about boosting privatisation but what is boosting? To what extent is boosting? Scientific research, particularly in economic sector, must use specific terminologies. It should be pointed out how many groups, companies, or corporations that the Government need. More or less than 100? Therefore, it is not difficult to create a descriptive table for the process of privatisation each year. Privatisation must be suitable to social bearability, government’s capability and management ability of functional bodies. Such requirements are limited and governmental research institutions could set up these itineraries. Unfortunately, this is still out of our reach.