(VOVworld) - Restructuring public investment and state-owned enterprises is considered essential to Vietnam’s overall economic restructuring. More than 100 economists gathered in Hanoi on Thursday to discuss ways to improve economic restructuring efficiency.

Equitizing state-owned enterprises is essential to restructure the economy

Vietnam’s public investment is comprised of funds from the state budget, government bonds, and foreign loans. From 1995 to 2011, state funds allocated to public investment accounted for 40 percent of the total. In 2010 foreign loans accounted for almost 37 percent. The rapid increase of public debt in recent years is attributed to unfocused and inefficient investment. By late 2010, Vietnam’s public debt accounted for almost 57 percent of its GDP. According to economist Vu Dinh Anh, the public debt is increasing while public investment is decreasing. Public projects are unable to pay back their initial investment plus interest, causing the budget deficit. Mr. Anh says the increasing public debt and foreign debt pose a financial risk. He believes public investment restructuring should increase investment efficiency and not worsen public debt.“In the next 5 to 10 years, public investment will mainly depend on economic growth and will demand a smaller portion of the state budget. It is important to retain the most efficient projects, which not only focus on infrastructure but also have a good return on investment potential,” said economist Vu Dinh Anh.

 Economists believe tight management of public investment is a key to the restructuring process. Doctor Tran Dinh Thien, Director of the Vietnam Institute of Economics said that the very first priority in the restructuring is the efficiency. “Cutting investment must be done efficiently. The major point is not the volume of investment but what can be done with that investment. The state is investing in too many projects which makes it impossible to manage them. The key to successful investment is logical thinking which calculates the opportunity costs,” said doctor Thien.

Regarding the restructuring of state-owned enterprises, economists insist that state-owned enterprises are the backbone of the national economy. But so far the performance of this economic sector has failed its mission even though it uses nearly 50% of all borrowed money in the economy. Former Minister of Trade Truong Dinh Tuyen says the state must determine which sectors need the state’s involvement and specify an appropriate proportion. Along with equitization, it is important to create fair competition and improve management of state-owned enterprises.

 Former Minister of Planning and Investment Tran Xuan Gia believes state-owned enterprises are only needed in the areas of national defense and security, social security, and areas essential to national development which the private sector is unable or unwilling to cover.

Economist Le Dang Doanh: The state-owned enterprises need to determine their key areas of investment and only focus their investment in these areas.

Economist Le Dang Doanh emphasized that the state-owned enterprises need to determine their key areas of investment. “The Electricity Company should only be involved in electricity. The Oil and Gas Corporation should focus on oil and gas. They should stay out of real estate or the stock market. State-owned enterprises have spent almost 1 billion USD investing in other areas. I am sure state-owned businesses should focus their investment in the areas of their greatest strength in order to accomplish their assigned tasks,” he said.

Economists warn that every state-owned enterprise needs to reform its management, improve its internal management and transparency, and ensure independent auditing.

Hong Van