Finance Minister Dinh Tien Dung (L) and his predecessor Vuong Dinh Hue (R) discuss with Deputy Prime Minister Vu Van Ninh during a break at a session of the on-going National Assembly meeting in Hanoi
Keeping state budget collection unchanged amidst the economic slowdown and reducing overspending are the biggest challenges facing newly-appointed Finance Minister Dinh Tien Dung, economists say.
The parliament last Friday approved the appointment of Dinh Tien Dung, 52, to replace Vuong Dinh Hue, who has been assigned to head the Economic Commission of the Communist Party of Vietnam.
Dung, who has a master's degree in business administration, recently left his position as chief of the State Audit of Vietnam, which he had headed since August 2011, the government said in a statement. He was once a deputy minister of construction and also headed two northern provinces.
"The newly-appointed minister faces a challenge in balancing the state budget. We need more capital for economic revival after years of stagnancy at a time it is difficult to increase budget collection," said economist Nguyen Minh Phong.
Vietnam, whose economic development has heavily relied on loans, now has to cut public investment as state budget revenues decrease in the wake of the economic slowdown.
With financial resources limited, the ministry could issue government bonds to raise capital needed to stimulate the economy, he said.
Echoing Phong, economist Le Dang Doanh said it would be very difficult to increase state budget collection until the economy recovers. "The problem will be solved only if the minister makes great efforts to restructure budget collection and spending, and reforms public investment."
It is necessary to have regulations that increase the effectiveness of state budget spending, he said. "This is a challenge that his predecessors never met."
Vietnam's budget deficit, which does not include principal loan payment, increased to 2.7 percent of GDP in the 2008-2012 period, from 1.3 percent in the 2003-2007 period, according to a report issued by the parliament's economic commission.
The Finance Ministry said public debt in 2011 accounted for nearly 55 percent of GDP that year at VND1.4 trillion (US$68.8 billion).
Another challenge facing the minister is the financial status of state-owned enterprises (SOEs) whose inefficiencies have created a burden on the economy, Phong said.
"It is necessary to have regulations to ensure that SOEs' financial issues are more transparent. And the minister will have to seek funds for their restructuring," he said, adding that it was not work that the finance ministry can deal with it on its own. He did not elaborate.
Vietnam's economy grew 4.89 percent in the first quarter of this year, slower than the 5.44 percent growth in the final quarter of 2012. The government is targeting GDP growth of 5.5 percent this year, slightly more than the 5.03 percent in 2012, which was the slowest in 13 years.
The slowing economy has led to an increase in bankruptcies. According to a recent report by the Vietnam Chamber of Commerce and Industry (VCCI), the number of businesses that shut down or suspended operations increased by 6.29 percent last year over 2011 to more than 54,200.
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