Dearth of society investment hurts economy

illustration photo source: Vnmedia

The low level of investment within society was ascribed as the main cause behind slowing economic growth in 2012 and the first four months of 2013.

Ministry of Planning and Investment (MPI) figures show that in 2012, total investment of society was tantamount to 28.5 per cent of the gross domestic product (GDP), down five percentage points against projections.

This slowed economic growth in 2012 to 5.03 per cent against the set target 6-6.5 per cent, despite an 8.4 per cent surge in state investment to VND195 trillion ($9.3 billion) last year.

According to MPI deputy minister Cao Viet Sinh, China led the world’s economic growth because its total investment of society often stays high exceeding 40 per cent of GDP.

Vietnam’s rapid economic growth in the past was also attributed to such high investment level.

For instance, in 2007 total investment of society reached 46.5 per cent of the GDP and the GDP growth was above 8 per cent, it gradually reduced to 34.6 per cent of the GDP in 2011 and 28.5 per cent of the GDP by 2012.

This year, state investment was set at VND175 trillion ($8.3 billion) only, down VND20 trillion ($952 million) over last year, putting pressure on society’s investment.

Lower state investment triggers the need to step up mobilising capital from non-state sector.

“We call for capital ventures from the private sector, but a number of problems persist with current mechanisms and legal framework. Such as, investors from assorted economic sectors are encouraged to take part in building the north-south highway network, but we have sourced official development capital for upgrading National Highway 1. This would avert investors from stepping into building other highways in terms of economic efficiency,” Sinh said.

National Assembly Economic Committee deputy chairman Mai Xuan Hung said declining total investment in society would badly affect economic growth and cause waste to investment resources.

“To boost total investment of society, we need to capitalise on bank credit sources from the part of businesses and the community,” said Nguyen Van Phuc, the committee another deputy chairman.

Phuc suggested presenting policies to inspire businesses and individuals to borrow for production and business expansion.