The Prime Minister has recently asked ministries, agencies and localities to tighten management of State capital sources in an effort to stop scattered investment and optimize the efficiency of State-funded projects.

Vietnam needs more than VND500 trillion to complete projects approved by the National Assembly and the Government in the 2011-2015 period. However, only VND225 trillion, less than half of the total amount, has been allocated for key projects including those to build transport infrastructure, irrigation works, hospitals and schools. This means nearly two thirds of the on-going projects will be put on hold.

For a long time the State budget has been considered the main source of capital to implement development projects and many sectors and localities want to divide the cake. Scattered and inefficient investment results from the confusion of concepts between administrative boundaries and economic space. Every province wishes to become a comprehensive economic entity that boasts integrated agriculture, industry and services, along with universities, ports, airports and economic zones, although many of them fail to meet necessary conditions for investment. 

Vietnam has a high incremental capital output ratio (ICOR) compared to other countries in the region and the world. Despite a decline in recent years, public investment still accounts for nearly 30 percent of total social investment capital. Without tight controls, the country will be faced with huge public debts in the coming years. The current public debt crisis in Europe has taught Vietnam an invaluable lesson.

Studies show that the crisis stems from improper public spending and investment. In awareness of that fact, the Government has ordered no new projects using capital sourced from the State budget and Government bond sales, except for natural disaster mitigation and key national projects, aimed at stabilizing the macro-economy and bringing inflation under control.

In fact, 6,730 out of 25,200 ongoing projects got off the ground in the first half of this year. Worthy of note is that the number of new projects is much higher than last year’s six-month figure, and many projects are slow going.

A recent Party resolution stresses that public investment restructuring is one of the three key areas that need to be addressed in the next five years to spur the national economy. The Government has identified a roadmap for realising the Party resolution by strengthening State management of investment sources from the State and Government bond sales. This is an urgent task that should be done promptly and efficiently.

It is necessary to revitalize the way the leaders think of and manage the implementation of socio-economic development tasks in order to mobilise, allocate and use domestic and foreign resources effectively. In other words, it is time to change the leadership’s thinking. Only when the leaders work for common national interests, is State capital used effectively.

VOV