On the occasion of the 60th anniversary of Vietnam's financial sector (August 28, 2005), Vietnam Business Forum (VIB Forum)'s reporter Minh Nguyet has a talk with Mr. Nguyen Sinh Hung, Minister of Finance about achievements and contributions of the sector to the country’s socio-economic development.
What is your evaluation of budget revenue and expenses over the past five years?
Between 2001-2004, the budget revenue increased on average of 16 per cent (50.7 per cent of GDP in 2001 and 53.5 per cent in 2004) excluding crude oil, while import-export revenue decreased from 25.3 per cent to 19.3 per cent. The revenue from FDI and non-State sectors increased 27-28 per cent, and from land resources 70-71 per cent.
The budget expense also increased by 16 per cent with bigger shares for development investment (29-30 per cent), education (17.1 per cent), poverty reduction and social welfare. In 2005, the expense will increase to 32.5 per cent for development investment (government and education bonds included).
The investment environment in Vietnam remains inefficient, what remedies do you suggest regarding the financial sector?
With its encouragement policy, Vietnam has attracted more investment capital, both local and foreign. Between 2000-2004, the number of non-State enterprises increased to 150,000 (four times that of 1991-1999). FDI was nearly US$18 billion exceeding the plan of US$15 billion.
Nevertheless, the investment environment must be improved further. The legal framework and financial-economic management remains incomplete and inefficient. The infrastructure, water and power supply, telecommunications are under-developed. Human resources fail to meet demand, and administrative formalities, especially in land clearance and compensation, are still inadequate.
For its part, the financial sector has made joint efforts to improve the investment environment such as introducing transparent and stable taxation policy, national treatment, single price policy, financial and stock markets, administrative reform especially in customs sector.
Would you elaborate further on financial reform and modernisation?
Vietnam has committed to the economic integration in depth and scale concerning CEPT-ASEAN, Vietnam-US bilateral agreement, negotiations with China, EU and the WTO.
The import-export tariffs must be reduced without discrimination regarding origins of commodities. Equivalent or lower tariffs will replace non-tariff measures. Tax rates and customs formalities must be compatible with international practice, without discrimination between domestic and imported commodities and services.
On budget expense, in implementation of WTO regulations, Vietnam must re-adjust its export support fund, taxes and domestisation rates.
On the financial service market, Vietnam must develop strategy and plan for concerned businesses, open the insurance, accounting, auditing and consulting markets without discrimination between local and foreign enterprises.
In fact, we are re-adjusting policy, taxes and customs in line with the integration process. In 2005 alone, 25 laws and ordinances will be endorsed to keep pace with WTO admission. Early this year, the Ministry of Finance submitted amendments to customs law which the National Assembly has approved. It relates to import and export law and will later apply to value added tax and special consumption tax.
For its part, the Ministry of Finance has developed a modernisation plan up to 2010, upgrading the management capacity to meet the demand of reform and integration with the resources and assistance at home and abroad.
Is Vietnam safe from financial crisis similar to those which affected regional countries in the last decade?
The reforms we have implemented in the past years have basically transformed the financial sector from a passive and subsidiary position enabling it to become pro-active, ensuring its healthy development and giving it more resources and autonomy. The budget size increased 2.6 times in 10 years, not only meeting the demand of development and social welfare, but also payment of domestic and foreign debts, thus improving the balance of payment and credibility in the international financial market.
Though some dangers exist due to weak competitiveness, under-development in the financial and banking system, arrears and bad debts, shortage of exchange products and the fact that it is a young financial market, a similar crisis is unlikely to occur as was the case in regional countries in the past.
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