Viet Nam's debt is within safe levels, says Nguyen Thanh Do from the Ministry of Finance. He spoke with the Dau Tu (Investment) newspaper.
Many deputies at the ongoing National Assembly session have expressed anxiety about the country's public debt. How do you respond to that?
There are no established standards regarding safe levels for public debt. At present, the European Union regulates that safe public debt is under 60 per cent of GDP; Japan set their standards at under 200 per cent while South American countries range between 40-50 per cent of GDP.
The United States and some other countries don't use GDP as the basis for calculating their public debt and rely instead on ceilings.
Though Viet Nam has not developed an overall ceiling for public debt, the Prime Minister has set a ceiling of 50 per cent of GDP for Government debt and external debt. Based on this criterium, I can say that our public debt still falls within the safe zone.
By the end of this year, the Government debt is expected to be about 45.3 per cent of GDP while the external debt should be about 42.8 per cent.
However, if we include the debts owed by State-owned enterprises (SOEs), our public debt would be very high.
Under the Law on Debt Management, public debt includes Government debt, debt guaranteed by the Government and the debts owed by local governments. We don't include debts owed by the SOEs like they were in Thailand, France and other countries.
Furthermore, as of July 1, 2010, all SOEs began operating under the Enterprises Law. The State only provides them with their ownership capital and they are responsible for the debts fall within the ownership capital allocated to them by the Government.
GDP increase during the last five year period (2006-10) was about 7 per cent on an average but the outstanding external debt was double that amount. Does that mean loans were used inefficiently?
According to Asian Development Bank statistics, average economic growth among ASEAN nations increased by about 5.6 per cent per annum during the last five years.
Specifically, Thailand increased by 3.6 per cent; Malaysia 4.5 per cent; the Philippines 4.9 per cent; Malaysia 4.5 per cent; Singapore 6.5 per cent and Viet Nam 7 per cent.
Looking at these figures, particularly Viet Nam's, I can say that we have used the internal and external loans efficiently – primarily for infrastructure development.
However the increase in debt is many times higher than the economic growth rate, do you agree?
I think such a comparison is inappropriate. Why? Estimates show that our economic value is about US$106 billion this year, triple that of the outstanding external debt. We have to admit that in the first years of economic development, our country's financial resources were limited. That was why we resorted to borrowing money from foreign countries to invest in infrastructure development. This is a normal practice globally, particularly the use of concessional loans with long maturity terms.
When do you think the external debts will be reduced?
The external debts will be reduced when investment projects start to generate returns to pay back the original loans. In addition, the national economy will have some reserves following a period of economic growth.
It means that this is the time for us to cut down on external debts and make the best use of the capital mobilised inside the country.
For the immediate future, we still consider external debt an important capital resource. Yet internal capital resources will be the key – a factor ensuring sustainable development for Viet Nam. — VNS