Nguyen Duc Kien, head of the National Assembly (NA) Committee for Economic Affairs, provided an insight into the possibility of meeting the target during an interview with the media on the sidelines of the current NA session in Hanoi.
VOV: Do you think that the Government’s target will be achievable?
Mr Kien: If we achieve a GDP growth rate of 6.5 percent in 2009, I think the target of a 15-percent inflation rate will be within reach. However, I think the Government will focus on curbing inflation and restructuring the economy rather than on achieving a high economic growth rate. If the Government does this well, the economic growth rate will probably reach 7 percent.
VOV: Is the 15-percent inflation rate too high, given a sharp downturn in global market prices recently?
Mr Kien: This target can only be achieved if we do not apply “shock therapy” to the national economy. However, we should take into account the operation of small- and medium-sized enterprises (SMEs). How will 350,000 SMEs operate from now until June 2009 if we continue to maintain a tight monetary policy and reduce the credit balance to below 20 percent as we did in 2005 and 2006? Therefore, our measures should be flexible enough to save millions of workers from redundancies. These measures should be implemented step by step so that SMEs need time to adjust and secure their assets and then generate steady jobs for employees. The inflation rate might be adjusted to below 10 percent, but surely we will have to pay a high price for it.
VOV: According to the Government estimate, the State budget deficit in 2009 will remain high, standing at VND87.3 trillion. How will the problem be solved to reduce inflation?
Mr Kien: The National Assembly Committee for Economic Affairs does not care about how much the budget deficit will be. We completely agree with the Government’s plan if the budget is spent correctly and efficiently. But, we will reject the plan if the budget is misused. Therefore, in our supervisory report, we have asked the Government to clarify on which areas the budget deficit will be spent. I think it is acceptable if the deficit is invested in key projects such as those to build 13 power plants, seaports and roads linking seaports to industrial regions. To carry out these projects, I think the budget deficit might amount to VND150 trillion. This is O.K. because these projects will turn a profit in three years’ time. If the deficit is spent on salary adjustments, the matter should be reconsidered carefully.
VOV: Despite a high budget deficit in 2008, investment efficiency has not improved significantly and the Incremental Capital Output Ratio (ICOR) has remained high. What will we do to improve the ICOR?
Mr Kien: Vietnam’s high ICOR was the unwanted consequence of the implementation of tight monetary policies and anti-inflationary measures. We had to cut down spending on unnecessary projects, causing many of them to come to a halt. In our report, we proposed increasing the efficiency of investment capital sourced from the State and businesses so as to improve the ICOR, because the total State budget allocated for investment projects makes up only 40 percent of total social development investment.
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