3:26:38 PM | 7/8/2005
Local Development Investment Funds Needs Further Support
Strategic role in economic development
To meet the demand of high economic growth rates, the mobilisation of financial resources has been most crucial for
Assistance to localities
According to the Ministry of Finance, the registered capital of 13 funds continued a stable growth of over 30 per cent a year. Most of them have increased to over VND50 billion. Some are even at higher levels such as
The structure of the capital has also changed in favour of loans and project financing (15-16 per cent). Several funds have the co-operation of commercial banks and credit institutions, organisations and individuals to increase their capital. As a result, idle capital has been mobilised for important projects in the localities.
Direct investment of the funds has also been diversified. While before 2000, it was only for infrastructure development. It has been now more versatile in joint stock companies with high efficiency, attracting private investment in local projects. By the end of 2004, the direct investment capital of the funds reached nearly VND180 billion, 6 times that of 2000. The growth rate of investment was 85 per cent a year in 2001-2004.
Some funds applied flexible solutions to recover the investment in such forms as BOT or BT, leasing investment rights or operation rights. Therefore the funds can transform medium and long-term investments into short-term investments. In 2000, there were only 3 funds applied the leasing, the number increases now to 7 funds with the capital of VND840 million, up 30 [per cent compared to 2000.
Some funds have issued bonds to mobilise capital for local development. Since 2003, two funds have mobilised VND4,244 billion (VND4,000 billion by HCMC and VND244 billion by Dong Nai).
Inadequate support in policy
According to Mr Pham Phan Dung, Head of Finance-Bank Department, Ministry of Finance, after 8 years of experiment, the State remains without a legal framework for the funds. It has caused several difficulties for the funds. The funds were either overly restricted or without guidance. They could not operate to their most efficient level.
Remaining burden
According to the development strategy, GDP in 2010 will be double that of 2000 with an average growth rate of 7.5 per cent a year. To achieve that goal, the economy needs VND250,000-300,000 for development investment. The mobilisation of capital must be diversified to meet the demand of the localities in such forms as joint investment, joint stock companies, buying shares of enterprises. It would attract investors, credit institutions, banks investing in moderate profitable projects but essential for economic development. The bonds would be an important channel to mobilise capital for the funds.
In the future, buying shares of the companies and issuing bonds for the funds will contribute to the development of a securities market.
Mai Anh
Vietnamese
