The Draft Law on public investment by the Vietnam’s Ministry of Planning and Investment (MPI) aims to increase the efficiency of public investment. So is this bill a magic wand to stimulate Vietnam’s economy? Vietnam Business Forum Newspaper interviewed Mr Bui Quang Vinh, MPI Minister, around this issue. Ha Phuong reports.
Minister Vinh said that the most important issue of the draft Investment Law is intended to correct is the weaknesses in the state management of public investment. It aims to restrict rampant approval of ineffective projects which caused losses, corruption and waste, and increased debt burden. Currently, the approval of public investment projects is rampant. For example, local government owed the debt for the construction of VND91 trillion, leading to the shortage of capital for thousands of companies. Currently, the government is directing localities to arrange use 30 percent of the annual budget to pay down this debt. Thus, over-expenditure for the period 2014 – 2016 has to be increased to have loans for completing more than 1,000 projects, not to mention the lack of capital for new projects.Minister Vinh said that the most important issue of the draft Investment Law is intended to correct is the weaknesses in the state management of public investment. It aims to restrict rampant approval of ineffective projects which caused losses, corruption and waste, and increased debt burden. Currently, the approval of public investment projects is rampant. For example, local government owed the debt for the construction of VND91 trillion, leading to the shortage of capital for thousands of companies. Currently, the government is directing localities to arrange use 30 percent of the annual budget to pay down this debt. Thus, over-expenditure for the period 2014 – 2016 has to be increased to have loans for completing more than 1,000 projects, not to mention the lack of capital for new projects.
Many experts believe that, the proposal of increased over-expenditure of the Vietnamese government, without solving the major problems of in the current investment, will cause huge waste. How is this problem resolved in the Investment Law?
In my opinion, the biggest content of Vietnam’s Investment Law is that how to issue the rules and, sanctions to restrict and terminate the rampant project approval status. In particular, it is the responsibility of the competent authorities in approving the project. Until now, many public investment projects were approved but did not operate effectively, even and no one is responsible.
With the new draft law, the MPI will focus on managing the entire process of using the investment capital from budget, the state’s securities, government bonds, local government bonds, official development assistance (ODA) and concessional loans from donors, investment and development credit by the State and any other investment capital in the state budget, loans from local governments build infrastructure. This means that all projects used a portion or all of the capital budget will be subject to the provisions of the Investment Law in each level of using capital.
So far, is the investment capital from the budget bound by any sanctions?
In practice, the capital was under the management and supervision from the central to local levels, and at different levels of laws, including the State Budget Law, Investment Law, Construction Law, etc.
But in fact, due to the lack of clear rules, the “hole” of public investment losses has grown.
So how are the overlapped and ineffective regulations between laws tackled by the investment law?
Currently, the authority and procedures for approval of public investment programs so far are unclear. For example, the provision of the Construction Law does not prescribe the details of content, assessment and approval of projects. And under the Investment Law, Construction Law, the ministries always approve the capital from the budget, but do not consider the efficiency and ability to payback capital budget. To resolve the biggest risk, which is widespread approval of investment projects, the draft law contains strict regulations from the stage of determining investment goals.
Accordingly, the projects can only be approved when the competent authority approved of the investment goals, identified sources of capital and the ability to balance capital. Or the authorities can just approve investment decision on the programme and project not overlapping other programmes and other projects in the planning.
But according to government reports, total state budget expenditure in 2013 is estimated at VND986,300 billion. State over-expenditure in 2013 accounts for 5.3 percent of GDP. Public debt accounts for 56.2 percent of GDP. According to the Government, the debt remains “within safe limits”. What is your opinion on this matter?
According to government’s calculations, when the budget over-expenditure increases by 1 percent, there will be VND40 trillion spending from government budgets and the government wants to use all of this increase for investment. Thus, with the predicted budget over-expenditure expected to increase by 0.5 percent, the budget deficit will increase by VND20 trillion.
The total state budget in the first 9 months of 2013 is estimated in the government report at nearly VND685 trillion, accounting for 70 percent of the prediction. In 2013, a total investment capital for social development of the Government’s estimate accounts for about 29.1 percent of GDP (the plan is about 30 percent of GDP). In particular, capital for development from the budget was more than VND201 trillion, VND57.8 trillion from government bonds, VND 53,400 billion from state investment credit. In addition, investment capital of the SOEs was estimated at VND39,800 billion, capital of citizens and the private sector is more than VND407 trillion, VND241 trillion is from the foreign direct investment capital.
Actually, loosening ceiling the deficit ceiling, which means allowing increased public spending, is also a measure to ensure economic growth in 2014 at about 5.5 to 5.8 percent. We are aware of the safety of the public debt, but in the current situation, the public investment is a fast acting solution to stimulate the demand of the economy, where monetary policy has limited effect. Once the economy absorbs more capital, there will be favourable conditions for increasing credit, reducing public investment, encouraging private investment and balancing public debt.
Đăng ký: VietNam News