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Cutting state investments: how much is enough?
According to the Ministry of Planning and Investment (MPI), by May 19, only 30 localities and nine ministries and branches had submitted reports about public investment cuts in order to fight inflation. 600 projects estimated at VND2tril have been listed to be cancelled. However, experts say that more cuts need to be made to curb inflation.
VND2tril ($125mil), a modest figure
By May 22, the list of the projects to be cancelled still had not been approved by the HCM City People’s Committee. However, a deputy director of the HCM City Planning and Investment said that 400 projects in the fields of infrastructure, health care, education and telecommunications, capitalised at several hundred billion VND, are being considered to find out which ones will be cancelled, which will continue and which will be postponed for a definite time.
The HCM City Post and Telecommunication Department has suggested postponing 15 state-funded IT projects with the total estimated expenses of VND67bil ($4.18mil). The investors have been slow in implementation, though they have been allocated capital. The initial designs have become backward compared to the current technological demand.
The list of state funded projects that need to be cut includes a lot of projects on building or upgrading the head offices of state agencies in HCM City. Especially, the project “Vietnam’s House” in Singapore has been marked for cancellation after two years of operation. The house consumes $100,000 every year.
Hanoi has also wrapped up a list of 29 projects to be postponed or cancelled with the total capital of VND518bil. Seven of the projects prove to be neither really necessary nor urgent, or the investors still cannot arrange enough capital. These include the head office of the Hanoi Planning and Investment Department, Hanoi Youth Culture and Sports Palace, and the Road 70 upgrading project.
Seven other projects totalling VND97.1bil ($6.06mil) have been postponed due to problems in site clearance or they are not really urgent. These include six projects on building head offices (VND29bil) and the project on the West Lake waste water treatment system.
According to the Hanoi People’s Committee, the total expenses of VND518bil ($32.37mil) to be cut will be allocated to very necessary and urgent projects which can be completed this year.
Deputy Director of the Da Nang city Planning and Investment Department Huynh Van Thanh said that the agency has asked to delay five projects and take back the capital allocated to four other projects. The nine projects have the investment capital of VND130bil ($8.12mil), while the total allocated capital for Da Nang is VND2,400bil ($150mil) in 2008.
The figure should be VND20tril ($1,250mil)
Nguyen Dinh Cung, Head of the Macroeconomic Research Division under the Central Institute of Economic Management (CIEM), said that 600 projects and VND2tril prove to be very small figures – nothing if compared to the huge number of projects and investment capital.
However, Cung said that small figures were expected, because no locality or ministry wants to cut investment projects in their localities.
Cung stressed that cutting ineffective projects proves to be a very necessary measure to reduce society’s demand, a measure to curb inflation. Now, state investment makes up 47% of the total investment of the society, a big source of money supply which can cause high inflation.
He said that VND20tril worth of projects needs to be cut to bring about the desired effects in fighting inflation.
VNN
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