VINACHEM

Deputies divided into two groups of opinions, with the first agreeing with provisions in the draft law that would make the State Bank responsible for regulating financial markets with such policy tools as the rediscount and refinancing rates. In the second option, credit institutions could set lending interest rates based on market principles, with the State Bank only intervening in times of wide fluctuations in the financial markets.

Deputy Tran Du Lich from HCM City argued that the past two years of ups and downs in the monetary market depended on the role of the State Bank.

"When the State Bank pumps money out into the market or reduces the money supply in the market, when it increases or decreases outstanding debt, the interest rate is adjusted immediately," Lich said. "We can't regulate the monetary market with administrative measures."

Tran The Vuong, from the northern province of Hai Duong, urged the National Assembly to consider carefully before eliminating the prime rate system.

He noted that Article 84 of the Constitution gave the National Assembly the power to determine national financial and monetary policy, and that both the existing law and the proposed law devolved that authority upon either the State Bank or the Government.

Under the proposed changes to the law, the National Assembly would have the power to set inflation rate targets and supervise the implementation of national monetary policy, while the Prime Minister and the Governor of the State Bank of Viet Nam would decide on the tools or measures used to achieve these objectives.

Ngo Van Minh from the central province of Quang Nam agreed with the proposed changes, which would place greater authority with the Prime Minister, and sometimes the President, while overall national monetary policy would be set by the National Assembly.

A second group of lawmakers, however, supported the existing system with a powerful central bank and a prime interest rate used as base principle for setting other rates and the primary tool for regulators to manage the monetary market.

Phan Trung Ly, from the central province of Nghe An, argued that the prime rate had been a highly effective tool for the State Bank to regulate the market, particularly in the last two years of financial crisis.

Pham Thi Loan, deputy from Ha Noi, also noted that prime rates were widely used by many countries around the world.

Le Quoc Dung, from the northern province of Thai Binh, noted that the State Bank of Viet Nam had evolved to fulfill two functions, those of a state bank and of a central bank.

"Market measures by themselves are not sufficient, nor are administrative measures," Dung said.

High-speed railway

In the afternoon session, most of the NA deputies said the Government should go ahead with the Ha Noi - HCM City high-speed railway project while agreeing on a number of recommendations made by the NA Committee for Science, Technology and Environment.

Legislators said the project was an important part of the entire country's socio-economic development in the context of improving the country's backward network of roads and railways.

The project, which should be completed in 2035, is expected to reduce the journey time between the two biggest trade centres in the country to five hours from the current 30 hours.

However, a committee report expressed doubts on the ability to mobilise nearly US$56 billion, or $35.6 million per km, for the project, said the committee chairman Dang Vu Minh.

Deputy Pham Thi Loan from Ha Noi agreed, saying the cost of building lots of tunnels, bridges and flyovers would be far higher than estimated.

"With the total investment of $21 billion for the first phase, each year alone will need up to $2.63 billion while most of the budget depends on foreign loans. Considering Viet Nam's current foreign debts of almost 39 per cent of GDP, Government's debts of more than 42 per cent of GDP and poor domestic accumulation and low foreign currency reserves, the project would considerably increase the burden of national debt," she said.

Loan suggested the Government mobilise capital on the basis of public-private partnership (PPP) on which the NA should issue a law to win the confidence of long-term investors.

Taiwan, where the PPP model helped build a highly efficient and effective high-speed railway, was a good example of that, she said.

Deputy Vu Thi Phuong Anh from the central province of Quang Nam said the Government should also take into account any possibility of price hikes and consider the choice of technology to be used in the project.

Ha Noi deputy Tran Thi Quoc Khanh said she doubted the project's financial efficiency. It would take at least 45 years to recover costs considering the Government's plan to set fares at 75 per cent of the cost of flights whereas an effective project usually needed 10 years to recover, she said.

Most of the deputies recommended the NA should only pass the initial project and leave the details to the next meeting after considering assessments made by relevant committees, public opinion and feedback from experts.

(Source: VNS)