Vietnam and the “investment addiction syndrome”

The Government of Vietnam is the biggest investor in South East Asia and South Asia, if considering the ratio of investment on GDP.

In fact, experts once gave warnings about the overly hot investments before. However, as the national economy restructuring has become most urgent than ever, the “investment syndrome” and its bad consequences has been, once again, mentioned as a “chronic disease” that needs urgent treatment.

In an article prepared for a workshop on the national economy restructuring held recently, former Deputy Prime Minister Vu Khoan recalled the “investment waves” which have been seen since the day doi moi (renovation) was kicked off in 1986.

Vietnam witnessed a lot of investment waves so far, including the wave of making investment in breweries, blast furnace plants, sugar refineries, motorbike assembling, offshore fishing, seaport development, and then industrial zone and economic zone development. Vietnam also saw the trends of pouring money into steel laminating mills, small scale hydropower plants, resorts, new urban areas, golf courses and then airports.

The figures about the “investment movements” in the past were put together by Head of the Economics Institute Tran Dinh Thien. The movements have produced 100 seaports, including 20 international ports, 22 airports, including 8 international ports, 100 commercial banks, hundreds of finance and securities companies, 18 coastal economic zones, 27 border gate economic zones. Especially, Vietnam now has 260 industrial zones, in which the occupancy ratio is less than 50 percent.

“I once told the newly appointed Minister of Planning and Investment that local economies and local authorities are “feeding” economic zones and industrial zones. Meanwhile, it is the economic zones and industrial zones should have served as the driving force for the local economies’ development,” Thien said.

Citing the investment projects and the investment capital in the last 10 years, Thien pointed out that resources have been spread to too many projects and business fields. Every month, Vietnam has two new universities and a new urban area.

He said that it is necessary to raise a question of who is making GDP in such a national economy which has been seriously distorted.

The statistics show that the government of Vietnam is now the biggest investor in South East Asia and South Asia, if considering the ratio of investment on the GDP.

Experts have pointed out that when the proportion of public debts on the state budget is at high level, this will weaken the macroeconomic foundations and make the national economy become fragile amid the influences from outside.

When reviewing the state budget plan implementation in 2011, the National Assembly’s Finance & Budget Committee pointed out that the expenditure on investment and development has exceeded the estimates and increased by 15.1 percent (23 trillion dong). This should be seen as a sharp increase if noting that Vietnam is following a tightened fiscal policy and trying to cut down public investments.

The government has called on ministries, branches and institutions to cut down public investment in order to curb the inflation. However, analysts believe that the number of delayed or canceled investment projects remains modest which still cannot help the problems in investment in Vietnam.

Statistics show that 117,335.5 billion dong have been allocated to 17,712 projects so far this year, of which 21,783 billion dong have been allocated to 5008 new projects, and 95,552.5 billion dong to 12,704 projects which were kicked off in previous years (7.52 billion dong per project).

The committee has found out that while the projects started in previous years cannot get priority in capital arrangement in order to complete soon, new projects still kick off, which is a violation of the Resolution No 11 of the government on the measures to fight the inflation.

At the recent meeting of the National Assembly’s Standing Committee, the National Assembly’s Deputy Chair Uong Chu Luu, citing the figure provided by the Finance & Budget Committee, said that 333 projects, which were not the subjects for using the capital from government’s bonds and questioned who has to take responsibility for the problem.

Source: TBKTVN

Tags: invest in Vietnam, Vietnam FDI, Vietnam FDI 2011, Vietnam investment