Minister of Finance Vu Van Ninh provides details of the State budget for state-owned groups and corporations in 2011 and defines their role in the economy.

In the 2011 State budget plan presented to the National Assembly Standing Committee there is an item channelling VND5,180 billion ($265,5 million) to State groups and corporations to conduct infrastructure projects. Does this mean that the State budget for State groups and corporations will increase in 2011?

That money is not capital granted to the groups; it is the money that the State provides groups to conduct tasks of the State. As they are State tasks, it must give money to groups to do them. For instance, developing a power network in the central highlands is not sufficiently profitable for Electricity of Vietnam. But the National Assembly and the government see that it is necessary to develop a power network in the region, so the government provides funding to EVN to complete the task. That is not capital for the group.

Only the provision of VND3,500 billion ($175 million) to PetroVietnam is different. The money is for conducting some national targeted projects. The group should have been able to keep all its after-tax profit.

That is normal practice, with enterprises channelling it into their own funds. But because oil is a national natural resource, the State takes 50 per cent of PetroVietnam’s after-tax profit. VND3,500 billion ($175 million) is less than 50 per cent and is for the group to conduct national targeted projects. Another example is the Dung Quat Oil Refinery. One part of its investment capital is from the State budget and one part from PetroVietnam’s borrowings. Later on, when we allow the group to manage the refinery we will also allow it to manage State capital in the refinery.

Basically, we do not now grant capital to State groups or enterprises.

Does the government have plans to create more access for non-state enterprises to participate in State budget-funded national projects?

It would be very good if they were capable of participating. We would have more channels to raise capital for the projects.

So they can’t participate because they are incapable?

It would be very good if they were capable of participating.

How do you define the roles of state-owned enterprises and non-state enterprises in the economy?

The main standpoint is that we encourage the development of all economic sectors.

State-owned enterprises are the pillars of the economy. But this does not mean that all preferential treatment goes to state-owned enterprises. There are areas that private enterprises cannot or do not cover as they are not lucrative enough. But as they are still necessary for the development of the economy, state-owned enterprises are involved. Besides, as the State wants to control the economy, state-owned enterprises must hold the controlling role in some sectors.

State groups and commercial banks are also being equitised. The State only holds a controlling share in those enterprises, not 100 per cent.

With recent developments in the milk and pharmaceutical markets [unreasonably high prices and questionable quality], some people are calling for more control from the State in those markets. Because the State does not hold control in those markets, it cannot control distribution. So it is worth considering whether the State should increase control over those markets.

Is there a possibility that public debt will reach 60 per cent of GDP in 2011?

The National Assembly Finance and Budget Committee has warned that public debt should be kept under the limit of 60 per cent of GDP. Actual estimates show that public debt is standing at only 56 per cent of GDP.

Previously we did not have a concept of public debt. Instead, we used a concept of government debt and national foreign debt.

The government plans to issue government bonds worth VND45,000 billion ($2.3 billion) in 2011 to fund infrastructure projects. What is the intended interest rate on the bonds?

Government bonds are sold through auctions, where the interest rate is determined. The general management direction is that we keep the interest rate as low as possible. Since the beginning of this year government bond interest rates have been gradually falling.

“Eradicating discrimination among economic sectors; eradicating all kinds of subsidy and preferential treatment for state-owned enterprises; counting correctly and fully all costs of their products, so putting state-owned enterprises on a level playing field with enterprises in other sectors. State-owned groups and corporations must focus on key sectors of the economy and focus on their main business. They must conduct compulsory auditing.”

Prime Minster Nguyen Tan Dung – “Solutions for Enhancing the Investment Environment and Production Development”, in the Government’s report on the socio-economic situation in 2010 and plans for 2011.

Source: VnEconomy