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Ministry calls for less public investment
The Government should reduce public investment to 3.5 per cent of the GDP this year, the Ministry of Planning and Investment has said.
The Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) newspaper reports that the ministry has also said that State Budget spending should not exceed levels accepted by the National Assembly and that the Government should not invest in trade promotion and other services that private sectors can do more efficiently.
These are part of 13 solutions mooted by the ministry to successfully restructure and increase efficiency of public investment.
Economic efficiency should be the first and most important basis for investment by the Government, according to the ministry.
Government investment in infrastructure should also be reviewed and adjusted in each sector.
The strategy should be for the Government to slowly reduce its investment (Almost 10 per cent of GDP) while strongly encouraging other sectors to do so.
The newspaper says that ratio of State contributions to social investment has been the highest, but this has been marked by low economic efficiency.
Management weaknesses and corruption in State investments have had serious impacts on the economy and should be addressed firmly.
Large-scale investments from the State budget along with an open fiscal policy have contributed to high inflation and unstable macroscopic economy.
At the same time, the low economic efficiency of these investments has meant that long-standing problems have not been solved, so it was difficult to attract capital from different economic sectors. For the last decade, Viet Nam's incremental capital output ratio (ICOR), which measures the amount of investment capital necessary for an entity to generate the next unit of production, has been sharply increasing, especially in government investment, and was at a high level compared to neighbouring countries.
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