Inefficient public investments hamper growth: experts

20/10/2011 09:58 am
CA - The low efficiency of Vietnam’s public investments coupled with the increased intervention by the State are among factors resulting in current economic woes, experts said at a seminar in Hanoi on Tuesday.

“Vietnam’s economy has become uncertain partly because public investments are too big but inefficient, coupled with the increased intervention by the State,” said Le Xuan Ba, head of the Central Institute for Economic Management.

Speaking at the seminar “Global Economic Prospects and Vietnam’s Responses,” Ba compared the average growth rates in two recent five-year periods to highlight problematic public investments.

The overall investment in the economy in the 2001-05 period accounted for 39.1% of gross domestic product (GDP), but the annual GDP growth rate was 7.2%. However, in the next five-year period of 2006-10, the economic growth slowed to 6.92% while overall investment increased to 42.7% of the GDP, Ba said.

He stressed that public investments made up as much as 45.7% of the overall investment in the past decade, which Ba said was a very high rate.

As percentages of the GDP, investment from the State Budget averaged out at 9.8% in the past ten years, capital from State-owned enterprises some 4.8%, and State credits 2.5%.

The efficiency has been quite low, as seen in the ever-increasing Incremental Capital Output Ratio (ICOR) index.

Ba referred to the numerous cost-extensive infrastructure projects that are of low efficiency. He pondered why Vietnam should have 100 seaports, 22 airports including eight international airports, 18 coastal economic zones, 267 industrial zones plus 918 industrial clusters, and 28 border economic zones among others.

“We have invested huge capital resources but the cost-effectiveness is low. If changes are not made, we will face more economic setbacks,” he said.

Ministries, State agencies and localities have submitted their lists of public investment projects for implementation next year to the Ministry of Planning and Investment, with the combined capital reaching a staggering US$300 billion.

“The economy’s size is only US$105 billion, so (the lists) show that we must set aside all GDP in three years to meet the investment demand for one year only,” he commented.

Ba also cited the Ministry of Planning and Investment’s figures to warn of a ballooning budget deficit, saying if Government bonds are taken into account, the real deficit hit 9.7% of the GDP rather than the formally-announced figure of 5%.

Nguyen Xuan Thanh from the Fulbright Economic Teaching Program drew the seminar’s attention to the increasing public debts.

Public debts, as calculated by the Ministry of Finance, had risen to 56.7% of GDP as of end-2010, far exceeding the discretionary proportion of 40% suggested by the International Monetary Fund for emerging economies.

Speaking at the seminar, Deputy Prime Minister Vu Van Ninh said the Government had revised down the economic growth next year to 6-6.5% compared to the previous target of 7-7.5% in a bid to stabilize the economy.

“The Government is also determined to restructure public investments, the State sector and the banking sector in the next couple of years,” Ninh added.
Source: SGT


Other news

Newsletter Sign Up
Common Information
 
 
 

home   |   news   |   services   |   partner   |   client   |   profile   |   policy   |   offices   |   site map   |   contact us

© Copyright by AnyNut. All rights reserved.

top page

FOR FURTHER COMMUNICATION, PLEASE CONTACT:

  • Head Office
  • Suite 420, 4th Floor, Petro Tower Building
  • #8 Hoang Dieu Street. Ward 1. Vungtau City - Vietnam
  • Tel: (84-64) 3 574 647
  • Fax: (84-64) 3 574 648
  • Email: contact@anynut.com
  •  
  • HoChiMinh Office
  • #71/16 Cong Hoa Street. Ward 4. Tan Binh District
  • HoChiMinh City - Vietnam
  • Tel: (84-8) 2 245 0401
  • Fax: (84-8) 3 844 0698
  • Email: info@anynut.com