NA gets budget conscious

Member of National Assembly Economic Committee and chairman of Civil Engineering Construction Corporation 5 (Cienco 5) Than Duc Nam shines further light on the budget situation for 2012-2013.

Fiscal policies are crucial to firms’ development. Would you shed some light on the fiscal policies in the year to date?

In the first nine months, disbursed state investment development capital only reached 71 per cent of the year’s projection whereas respective figures for government bond capital and state investment development credit were 63.3 and 84 per cent.

These key state-funded capital sources dropping set targets would lead to total development investment capital in 2012 slide to 29.5 per cent of the GDP only (VND870 trillion or $41.4 billion), far below 2011’s level 34.6 per cent and dropping 33.5 per cent projection for 2012.

What would be the consequences when set financial sources were not fully distributed?

The state dropping state capital disbursement targets would discourage other capital sources from making further investment ventures which has placed firms into difficulty.

I met leaders from 200 businesses based in central Danang and got to know that most of firms were in the woods on the back of low consumption and persistent debt situation.

Let’s take the case of Cienco 5. In early 2012, we sought to achieve total revenue VND4 trillion ($190 million) but just posted around VND1.7 trillion ($81 million) in the year to end of September.

Sliding revenue was due to a bunch of factors with the most important one being unpaid payments for completed workload by the state. At many projects, we closely observe progress targets, but have yet to receive payment from the state, meanwhile we ought to pay bank interest which has bitten into the company’s profits.

Other businesses in other fields face a similar situation and this has had chain effects on other fields of the economy.

What will be the case for 2013?

In 2013, total development investment capital of society may be a bit higher compared to 2012 at around 29.7 per cent of the GDP, tantamount to VND1,003 trillion ($47.7 billion) including VND180 trillion ($8.6 billion) to be sourced from the state budget, VND45 trillion ($2.1 billion) from government bonds and VND60 trillion ($2.8 billion) from state investment development credit.

In my view, the state would need to fully disburse these amounts to fuel investment from other sectors as well as from external sources. Capital sources from state-owned enterprises sector, private business and the community are estimated to hike 20 and 29 per cent, respectively in 2013 compared to in 2012.

However, non-state sector’s capital sources would increase only when the state as the biggest investor also scaled up investment.

Will inflation come back once financial and monetary policies were loosened?

There need to be multiple measure packages to curb inflation, but if we adopted too cautious approach through exercising stringent fiscal and monetary policies this would hurt firms.

In current context, underperformed businesses should be allowed to go bust whereas practical fiscal and monetary polices are urgent to help firms temporarily incurring difficulties get through this tough time.

Only when firms resume growth and get back on development track could the state be in a position to finalise 2013 budget revenue target of VND807 trillion ($38.4 billion).