Steering economy away from rocks

The year 2011 has passed, but Vietnam and the world economy still face many difficulties.  What does 2012 hold for the financial sector?

The government wants to continue controlling inflation, stabilising the macroeconomy, maintaining a reasonable economic growth rate and ensuring social security.

In addition, to create stable foundation for sustainable growth in medium and long-terms, in 2012 the economy growth model will be restructured. The restructuring of public investment, state-owned enterprises and commercial banks will be a priority in 2012.

To achieve these goals, we will continue implementing tight fiscal and monetary policies.
To increase the budget collection, solutions are needed to cushion free falling enterprises.

The more enterprises’ production grows, the more revenue there is for the state budget. In addition, the MoF will collect revenue from areas such as land, minerals, natural resources, exports and imports and fight against transfer pricing and tax evasion.

For spending, all ministries, central agencies and local authorities are required to reduce non-wage recurrent expenditure by 10 per cent. Therefore this year, the government will not cut public spending and investment like last year. However, the government still requires agencies to enhance management activities to reduce unnecessary costs.

With a higher collection of tax and lower spending, the budget deficit is estimated to decline to less than 4.8 per cent of GDP.

In 2011, enterprises faced many difficulties in accessing capital because of the tight monetary policy to control high inflation. In 2012, such a tight policy will  still be applied. Will enterprises continue to face difficulties?

The macroeconomy performance last year is evidence that tight fiscal and monetary policies are necessary.   However, the government will also have solutions to relieve difficulties for enterprises.

Moreover, when the inflation target is achieved, lending rates will reduce and enterprises will access bank capital more easily. The MoF is constructing other solutions to help enterprises address difficulties by offering tax incentives.  

What are the specific supportive solutions for enterprises?

Regarding tax, the MoF recommended to exempt some taxes for enterprises, especially for small- and medium-sized enterprises. The MoF also recommended not applying higher land lease prices this year.

Although the government will consider solutions to support enterprises, the range of support is limited.  Therefore, it is important for enterprises this time to quickly restructure their manufacturing and business operations, reduce costs and overcome market difficulties by themselves.

There are two issues that the public is especially concerned about. They are domestic retail petrol and electricity prices. What is the general management direction of these prices this year?

In 2012 as well as in the following years, we will manage prices under market principles, especially in controlling electricity, coal and petrol prices. In 2012, the National Assembly will consider approving the Price Law. The MoF will issue guidance documents to execute this law.

Firstly, the MoF will coordinate with related ministries and agencies to complete price control and price stabilisation mechanisms, based on the regulations stipulated in the Price Law.

The electricity price adjustment roadmap will be based on a cost and profit offset mechanism. It is not only necessary for Electricity of Vietnam (EVN), but also a solution to attract other investors into electricity generation as currently the demand for electricity is high.

Obviously, when electricity prices are adjusted, it is necessary to have solutions to support the poor and people with low incomes. Moreover, to avoid causing market pressures, the government will change prices in  a reasonable manner.

In tandem with electricity price adjustment, we also require EVN to reduce expenditure and energy losses, divest capital from non-core businesses to focus on developing the electricity industry and especially develop an electricity grid system to ensure electricity production transmission.
This year, the State Audit will audit Petrolimex and the State Inspectorate will inspect EVN.

Moreover, we will also focus on inspecting units out of the electricity industry and units which sell electricity and coal to this industry. This will give us an overall picture of the  electricity industry.
For the coal industry, in 2012, we will adjust the coal price equal to 80 per cent of the coal price for other industries.

The MoF has just completed compiling a project to restructure state-owned enterprises, the stock market and the insurance market. How is this project progressing?

Restructuring the economy is a central issue this year. Besides the three main tasks mentioned above, we need to improve the financial ability of public service delivery units, especially units in education, health and science areas. If their financial ability is not improved, it will be difficult for those units to reform wages.

The MoF has submitted its state-owned enterprise restructuring project to the government and it will be submitted to the Party Central Committee and Political Bureau  for approval.

The stock market plays an important role in promoting economic growth. I have already directed the State Securities Commission to announce short and long-term solutions to boost market development. In the near future, state-owned enterprises’ equitisation will be speeded up, especially for big enterprises. As a result,  the stock market will be improved.

The MoF is also constructing an indirect investment project to improve market consistency and information provision, and manage the stock market in step with international practices. The ministry also made a full report about stock market status and submitted solutions to the government.

They included cooperation between the financial sector and the central bank to improve the stock market and attract more capital, especially foreign investment into the stock market. I believe that as the macroeconomy gets better and the supportive solutions for this market are implemented, the stock market will overcome its current malaise.