Government is accountable for spending taxpayers' money: economist

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A view of a state-owned fuel storage facility in Vietnam. Experts have proposed that the government accelerate selling stakes in state-owned enterprises operating in non-vital sectors.

The recent Autumn Economic Forum, where government officials and economists gathered to discuss the problems with the economy, focused on describing the difficult situation rather than offering solutions, according to critics.

Le Dang Doanh, an economist who attended the event, dismissed the criticism, saying many suggestions made by experts about reforms have been shelved and consequently the economy continues to slow down.

He tells Vietweek transparency is the first requirement for the government.

Vietweek: Can you elaborate on the measures offered by you and other economists that you said have been shelved?

Le Dang Doanh: At the Spring Economic Forum six months ago in Nha Trang and the Autumn Economic Forum recently in Hue, many experts suggested solutions for restructuring state-owned enterprises (SOEs), reducing non-performing loans, restructuring the banking system, dealing with pervasive cross-ownership of banks, reviewing public spending, and reforming the economic and political institutions to create a healthy environment for business and investment.

However, these proposals were not implemented fast enough, partly because many of them were just ideas for [changes in] policies. But, more importantly, there are big hurdles to implementing them, as we have seen in dealing with bad debts or disbursing the VND30 trillion (US$1.4 billion) loan package for the property market.

[Government] capacity may partly cause these hurdles, but they may also be caused by [conflicting] group interests. An example is the VND1,300 trillion ($61.6 billion) debts of state-owned economic groups and corporations, for which we have not had any comprehensive solution. The reform of SOEs and the withdrawal of government investment from these firms are very slow. Another proposal has not been carried out, which is to ensure transparency in appointing SOE bosses on a contract basis with clear conditions related to performance. That was why at the latest economic forum experts called for immediate implementation of the solutions.

Our economic development is below potential. Efficient restructure and reform will help it grow faster and more effectively, the economy will be more stable, people's lives less difficult, and corruption and squander will be lessened.

 
Economist Le Dang Doanh

The government takes a lot from the people but does not provide them adequate benefits yet

What should the reforms focus on?

Transparency is most important. For example, what does the government use tax revenues for? Taxes are to be used for providing public services like healthcare and education and building infrastructure. They cannot be used primarily for maintaining the state mechanism, such as paying government workers' salaries and travel and accommodation, or their trips abroad. I think the government and its leaders must be held accountable [for the use of tax revenues]. They are spending people's money, they must be clear about what and how it is spent.

In many countries, the government makes these issues transparent on its website. Their schedule, air tickets, receptions, and travelling expenses are open for public scrutiny. I experienced that when I was in Sweden. I had a per diem allowance of $34, but [the Swedish side] made it clear that it would be cut by 20 percent if I had breakfast in the hotel and by 40 percent if I accepted lunch invitations. Their management and monitoring [of public funds] is a good lesson for us to learn, and even more so in times like this.

CURRENT SPENDING RISING 'UNCEASINGLY'

The government's current spending topped VND424.4 trillion (US$20.1 billion) in the first eight months, making up 70 percent of total spending. Minister of Finance Dinh Tien Dung said current spending is "increasing unceasingly, it is increasing too fast. In the last three years current government spending at the end of the third quarter surpassed estimates by 10 percentage points to 69 percent of government spending [instead of the estimate 59 percent]."

The government's current spending is accelerating while revenues are lower than planned and the economy is in a bad state. What do you make of this situation?

When a government gets money from the people, it is only fair that it has to make sure of their welfare. In our case, however, while the government collects many kinds of taxes and fees, most public services related to roads, infrastructure, healthcare, and education are very weak. In short, the government takes a lot from the people but does not provide them adequate benefits yet.

So do you think it's appropriate [for the government] to increase the budget deficit limit?

In really difficult times, raising the budget deficit limit may be a temporary solution. But it must be clear that the government increases the limit by issuing bonds and uses the proceeds for investment and not current expenditure.

Even when it is used for investments, there must be binding conditions in terms of effectiveness, sectors, individual responsibility, and time frame. It is not possible to just say "investments" generally.

Since we have not been able to cure the problems of waste and ineffectiveness in public spending, for now the effectiveness of investment must be the number one priority. Otherwise we will again face the threat of inflation and our economy will again be stuck in a vicious circle of fighting inflation and falling into a slowdown like the past few years.

If the parliament approves the government's proposal to hike the budget deficit limit to 5.3 percent of GDP, for how long and under what conditions should it be?

I think the budget deficit limit should be up for two or three years, then we should gradually reduce it [to the existing level]. And the conditions for such an increase is that it will be spent on [improving] infrastructure, hospitals, and social welfare. Besides, these investments must be strictly monitored to ensure they deliver the best results.

If you can make just one suggestion to help lift the economy out of this state, what would it be?

I would continue to suggest that we speed up the equitization of SOEs. That would both help improve the state coffers and the performance of the SOEs. In practice, most SOEs operate better after being privatized. Therefore, we must not hesitate any longer.

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