VietnamNet Bridge – The low inflation rate in the first months of the year is believed to be a good condition for Vietnam to launch a new bailout, worth 100,000 billion to have the national economy escape the current gloomy situation.

Selling profitable SOEs

In its latest report about the economic performance in 2013, the National Financial Supervision Council said Vietnam now can launch a public investment stimulus package though government bond issuance.

The package would have set the debts in the structural investment, estimated at 94,000 billion dongs. It would also help speed up large scale key projects, thus helping restart the capital flow from businesses.

However, what Vietnam needs to do is to increase the investment capital, but it must not increase the state invested capital.

On the issue of stimulating the economy, Ha Quang Tuyen, a senior expert from the general statistics office said the inflation sometimes goes contrary the economic growth.

In 2011, Vietnam’s inflation rate was relatively high (18.5%) but GDP still grew 6.24%. In the second half of 2012, though the government raised the public investment capital sharply from 12,000 billion dongs to 21,000 billion dongs a month, which meant the sum of money put into circulation was doubled. This merely did not have influence to the inflation. Therefore, the key here is to inject money in the right places and at the right time.

He has warned against the cash pumping in masses, or what happened in 2009 would repeat this year.

Dr. Vo Tri Thanh, Deputy Head of the Central Institute for Economic Management, said the macroeconomics risk still exist while the inflation risk has been eased, therefore, there are the opportunities to apply some measures to support enterprises. However, the support should not be demand stimulus packages which were launched in 2009.

At present, there are two viewpoints about what to do to simulate the economy. Some economists believe it’s time to deploy a bailout worth 100,000 billion or 200,000 billion. However, Thanh thinks it is not very likely to happen, because the government needs to focus on the duty of stabilizing the macro economy.

Some others have suggested issuing government bonds. However, the government bond issuance must be approved by the national assembly.

Also, according to Thanh, selling profitable state owned enterprises would be a good idea. The money from the sale would be poured into the right places, thus helping stimulate the economy. However, Thanh asserted that it would be impossible because it is a “sensitive” issue.

Issuing bonds means borrowing money from people

Bui Kien Thanh, a well-known finance expert, stimulus packages are a kind of heroin, not the proper solution to the national economy, and that what Vietnam needs is a healthy economy, which does not have to use stimulus packages.

He went on to say that a bailout would not help but cause uncertainties to the national economy.

Thanh believes that in order to effectively develop public investment, it’s necessary to develop the economy first. Once the economy remains weak, pushing up the public investment would lead to the higher state’s debts.

In the eye of the experts, by issuing bonds, the government would owe money to the public. Issuing government bonds at this moment would only help commercial banks, which have redundant capital, to spend a part of the capital.

Tien Phong