VAFI Proposes Five Solutions to Budgetary Increase

 

In the proposal sent to the Prime Minister, relevant ministries and the lawmaking National Assembly, VAFI mentioned five solutions to increase the State Budget’s incomes. It said if big and effective State-owned companies like Mobifone, Viettel, Sabeco, Habeco, and Vinamilk go public, the national budget could have US$5 billion. If State stakes in such enterprises are retained, huge assets will not be used effectively while the Government has to borrow money for huge public investment.

Besides, Ho Chi Minh City and Hanoi, the two biggest cities in Vietnam, necessarily take the lead in selling State-owned valuable real estate in the downtowns to get money to build city train rails to solve current chaotic traffic situation there. Valuable real estate proposed to be sold includes trade centres and luxury hotels currently managed by State-owned enterprises or joint ventures with State stakes, including Daewoo Hotel - office complex, the Rex Hotel, the Caravelle Hotel, and Metropole Hanoi Hotel. Those valuable assets haven’t generated any money to these cities’ budget as the profits belong to State-owned enterprises, which can evaporate due to their ineffective operation.

 

In addition, VAFI said technical solutions can be employed to convert big effective State-owned groups and corporations into new-model companies in 30 days with three shareholders being the Government, the Trade Union, and the Party entity, aiming to collect dividends from these greatly privileged enterprises. Converted companies will be those without privatisation plans like VNPT, PetroVietnam, SCIC, Viettel, EVN, Vinaphone, and lottery companies. These business entities may bring dividends of around US$2 billion a year.

 

Specially, VAFI suggested imposing special consumption tax, or excise tax, on gold, like beverage, automobile and motorbike, to reduce the usage of gold for payment as they are also luxury items whose trade and consumption require the Government’s intervention. The association proposed a 20 percent special consumption tax on the purchases of gold bars and gold jewellery, while zero tax is applied to gold sold to the State Bank of Vietnam at world price. This is the only single measure to end gold accumulation and dollarization.

 

If this measure is taken, it will create an inflow of trillions of Vietnamese dong to the banking system and create forex stability. This measure will also help to bring interest rates for Vietnamese dong down to 3 percent annually and add to foreign reserves US$30 billion to raise the value to US$60 billion. Then, the image of Vietnam's economy will be different from now. Also, if companies borrow Vietnamese dong at only 5 - 6 percent per annum year and US dollars at 2 percent, Vietnam’s economy will recover faster and develop more sustainably and the State Budget will certainly increase as a result.

 

Finally, according to VAFI, the State must define the stock market as a leading economic front where capital is injected into the entire economy, including the banking system, rather than commercial banks funding the entire economy as thought earlier. Then, it needs to give priority to the construction and development of securities industry into a core economic sector of the country. By combining all these measures, State revenue will increase more than ten times from now.