Avoiding Waste on Development Resources

Economist Vu Dinh Anh said Vietnam has carried out economic restructuring with three main contents of public investment restructuring, State-owned enterprise (SOE) restructuring, and commercial bank restructuring from 2011 to 2015 as defined in the Resolution of the Central Party.

 

In fact, although the scale of public investment fell from a peak of 20 percent of gross domestic product (GDP) in the 1999 - 2006 phase to 12 percent of GDP in 2014, much of State money was used wastefully and inefficiently. He cited that many public works are of no use while others are packed with users. For instance, a standard class is designed for 35-40 students but I often see 50 students in a class and many schools have to teach rotationally because of excessive students. Hospitals are overcrowded nine times out of ten. Therefore, Anh recommended controlling public investment at 10 percent of GDP, citing that State funds will only go to sectors and fields that the private investor does not want or cannot invest rather than pour money into production and business that others can do well.

 

Economist Pham Chi Lan said it is necessary to expand the limit and scope for the private economic community to engage in works or big projects which have been long preferentially given to State-owned corporations. She added that the reduction of State direct engagement in production and business sectors is not right but the State should withdraw completely from these sectors. Loosen public investment is unlikely to address limitations if the State is still greedy and thus State roles in a market economy are essentially redefined. In the current multidimensional economic trends and contexts, the State needs to give up or return some public investment items to the private sector otherwise it will further distort if the State is still greedy for public investment and direct production and business, Lan noted.

 

Dr Nguyen Tu Anh, a specialist from CIEM, said restricting public investment and restructuring public investment are only now limited to tightening public investment disciplines - investment will only be carried out if sources are available. There is no mechanism that allocates public investments to lead investors based on competitive regime. Public investment disciplines are lax while hard planning is lack. The biggest risk is growing public debt and macroeconomic instability.

 

State direct intervention into the economy through public investment is still present. State budget revenue to GDP ratio tends to decrease. Besides, the Law on Tender and the Decree on Public-Private Partnership (PPP) provide an important legal framework for applying market principles to public investment allocations. Nevertheless, these legal documents are still on paper, yet to come into life because of insufficient guidelines. Central and local authorities have not yet established a unified indicator system for allocation, monitoring and evaluation of public investment funds, resulting in ineffective public investment, he stressed.

 

Dr Huynh The Du, Director of Fulbright Economics Teaching Programme, said the most serious issue in Vietnam for the time being is the "lobster" policy mechanism, that is, almost every locality always wants to have scalable works to get supports from the central budget without regard to their effectiveness and usefulness. Accordingly, the Government of Vietnam is seeing difficulties in allocating its limited resources. Currently, equity issue is considered a main base for budgetary allocation while efficiency issue is not considered essential. Evidences show that much of budget is being allocated for disadvantaged areas while localities that create productivity and high added value do not receive enough resources. Giving evidence to his statement, Du said, Vietnam's total expenditure to GDP was about 30 percent in 2012 but Ho Chi Minh City, the biggest source of State Budget, only spent 9.5 percent. The city's current GDP is about US$40 billion a year but its budgetary expenditure is only US$3-4 billion.

 

He also pointed many cases of extravagant State-funded public investments, citing the Vietnamese Heroic Mother Monument worth VND400 billion in Quang Nam province or a big square worth VND1,400 billion in Son La province who has annual budget income of VND3 trillion. Reportedly, Hanoi, the capital of Vietnam, abandoned a museum worth of tens of billions of Vietnamese dong to build but it planned to build another with estimated value of VND11 trillion. Recently, many localities revealed their plans to construct new administrative centres worth thousands of billions of Vietnamese dong each.

 

Dr Nguyen Dinh Cung, President of CIEM, said that this is an extremely thorny issue. He likened public investment to a diseased person who carries a lot of contagious diseases but many others are employing this person.