VINACHEM

Financial expert Bui Kien Thanh told the Tien Phong (Vanguard) newspaper that one of the key tasks in managing the country's macro economy was to lower the lending interest rate.

What measures should Viet Nam take in order to help lower the lending interest rate?

If we want to cut the current lending interest rate (18-19 per cent per annum), the State Bank of Viet Nam (SBV) must adopt several measures, including official tools regulated in the Banking Law, which was adopted by the National Assembly last year and came into force on January 1 this year.

Under Article 10 of the banking law, the SBV is authorised to lend directly to commercial banks without the requirements of paying depreciation or exchange fees or going through the open market in order to pump more money into the banking system.

By exercising such authority, the SBV will be able to perform two missions at the same time – to help control the increase in the lending interest rate and the inflation rate.

In addition, the SBV is also given authorisation, as is the case in the USA, Europe and Japan, to announce the interest rate that all commercial banks have to apply.

This is what the American Federal Bank does, it may decide to impose an interest rate of 0 per cent, 0.2 per cent or 0.5 per cent depending on the monetary demand with the aim of fostering a healthy national economy with enough liquidity. This is a good administrative measure and an example of effective monetary policy.

In Viet Nam, domestic saving accounts for about 30 per cent of Gross Domestic Product (GDP). However in 2010, 43 per cent of the GDP was invested in development. The figure shows that with the 13 per cent surplus, the SBV had to find some way to strike a balance to stabilise the national economy.

I must say that the amount of gold and US dollars kept by the people is rather large and this gold and dollars is sitting idle. It would be much better if it was invested in production.

In my opinion, one of the key tasks for the SBV this year is to keep track of the cash flow issued by the bank. If the bank does this job properly, I'm confident that we will be able to put a cap on inflation.

The Ministry of Finance has said that in 2011, the price of petrol, diesel and electricity and coal used in production will be decided by the free market. Do you think that the decision will hamper Government efforts to control inflation?

There are two ways of looking at this question. First, our economy is now a market economy. So there is no reason why we should continue to strictly regulate coal and electricity prices. What we have to do now is to stabilise prices with acceptable proposals. I have to concede that many commodities at present still enjoy Government subsidies to help out in areas such as input materials in production. So no doubt, when the prices of coal and energy, including electricity and petrol and diesel, are fully calculated, the prices of many commondities will increase. As a result, the consummer price index (CPI) will increase. I don't think we should worry about that. What we should do now is to have good management of the economy.

Second, we must adjust our financial policies, particularly in ensuring more prudential use of the State budget when it comes to less efficient projects. If we do well with budget management, our economy will be balanced – a prerequisite for stabilising prices in the market.

You mentioned the importance of good management of State corporations and groups in 2011. How should this be carried out?

In my opinion, the best solution is to liquidate affiliated companies that have operated at a loss while accelerating the process of equitisation. In the worst cases – companies that are in big financial trouble, just let them go bankcrupt. I think the Government has already issued policies on that.

The other thing I should say is that State corporation and groups should be urged to focus on their registered business and try to practise thrift in their way of business.

In addition, auditing firms and inspection agencies should make regular visits to State corporations and groups to ensure they comply with the law. — VNS