A reporter from Radio the Voice of Vietnam (VOV) interviewed Dr. Le Dang Doanh, Head of the Central Institute for Economic Study and Management on Vietnam’s monetary policies – its shortcomings and strengths at the beginning of the New Year.
Reporter:
In 2007, foreign investment flows into Vietnam were gigantic but there are also shortcomings in disbursement and inflation remains. What do you think about the issue?
Mr Doanh:
Vietnam
’s foreign investment capital has increased remarkably, up to US$16 billion compared to the 2006’s figure (US$10,1 billion). This is a spectacular rise.
Vietnam
disbursed US$2.2 billion in 2000 and US$4.1 billion in 2006, US$4.5 billion in 2007. The figures have shown that although FDI capital has increased, the disbursement rate has declined. For better disbursement, it is necessary to take measures to solve issues on infrastructure, land policies and the supply of human resources which meet the requirements of enterprises.
Reporter:
What is the main reason for slow disbursement and inflation?
Mr Doanh:
Inflation in Vietnam is attributed to the rise in the world oil price. In addition, floods and epidemics like bird flu have also affected food and foodstuffs sources to the Vietnamese market. Additionally, there is a problem with Vietnam’s monetary policies. We have issued a huge volume of cash to buy foreign currencies, leading to a rise in prices. The price hike in Vietnam is considered the highest in the region, or even in Asia as a whole.
Reporter:
Do you think that excessive imports also affected the Consumer Price Index (CPI) in 2007?
Mr Doanh:
It is obvious that excessive imports means importing goods from foreign countries at a high price. However, many Vietnamese goods are now sold at high prices anyway, such as automobiles and pharmaceuticals. In the long-term, if we do not find ways to export goods and improve our competitive edge, we will have not enough money to import goods.
Reporter:
What do we have to do to overcome these shortcomings?
Mr Doanh:
In my opinion, first, Vietnamese businesses should improve their competitive edge so that local consumers can buy their products. Second, there should be technical barriers to control imported goods such as food and children’s toys. Third, it is necessary to improve the capacity of local distributors so that Vietnamese goods can win the trust of local consumers.
Reporter:
Do you think that our country will be caught in a passive situation in the context of the soaring global prices, especially petrol prices?
Mr Doanh:
It is a fact. When the petrol price increases, the prices of other products also rise such as fertilizer, pesticides, plastics, and food. Therefore, we should offer comprehensive policies for the medium and long-term, including finding other sources of energy to replace petrol.
Reporter:
What solutions should we take to stabilise prices and remove subsidies to oil and petrol?
Mr Doanh:
In fact, the Government has developed a detailed programme to remove subsidies for petrol. In addition, it is necessary to set up a fund to stabilise prices. In my opinion, the fund should not be taken from state budget.
Reporter:
Monetary supply is also one of the reasons for high inflation. What are the solutions for 2008, do you think?
Mr Doanh:
We have had discussions to develop solutions. First, an increase in saving interest rates is necessary so that people will put their money in banks. Then, banks will find ways to use these money effectively. In addition, it is also important take some measures such as issuing government bonds. However, these solutions can only drive back inflation for a period of time.
Reporter:
What do you think about price movement in 2008?
Mr Doanh:
I can only anticipate that market prices will increase from now until the Lunar New Year festival (Tet).
Reporter:
Thank you very much.
Source VOV
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