The amount of investment capital flowing into Vietnam will increase rapidly in the near future and this alone will cause economic growth. It is expected that foreign investment of all types will account for more than 40 percent of Vietnam's gross domestic product (GDP) from 2006-2010. With all this money flowing in, the ministries and industries should devise a long-term development plan, create an environment in which fair competition is possible and improve the use of all State capital, particularly the State Budget and that acquired through loans. Economic experts say using money well is the key to sustainable economic growth.
Right now, the use of State capital at State-owned enterprises is a major problem. Thomas Vellely, the director of the Vietnam Program, said that a large amount of investment capital comes into Vietnam from official-development-assistance (ODA) loans and overseas Vietnamese remittances. He warned that unless the use of investment capital improves, these 'easy' sources of capital will dry up and the total amount of investment capital that comes into the country will drop.
The World Bank funded the Miyazawa audit-analysis that included an appraisal of a number of Vietnamese State-owned enterprises involved in shipping, the fisheries, textile/garments, sugarcane/sugar, steel, paper, cement, foodstuffs and more. It was found that the enterprises have absorbed tremendous amounts of capital and that money was not well used. Now that Vietnam is a member of the WTO, investors will look into investment possibilities in the country. They will also become aware of this appraisal and it will affect their decision.
Vietnamese economic experts say that the economic growth that has been seen in Vietnamese in recent years is mostly due to the influx of investment capital (30.33 percent of the GDP) and crude oil exports. If investment capital is poorly used by the State, economic growth should be expected to slow in the near future.
That State capital and ODA loans have been poorly used is beyond a doubt. Interestingly, the State sector believes that private businesses are not entitled to handle large projects financed by State capital or ODA loans. Some people have proposed that, regarding aviation, the State maintain control of the airports while private businesses handle air passenger and cargo transportation.
Regarding post and telecommunications, State officials want to maintain control over the national post and telecommunications network. It's accepted that electric power production should be privatized while the transmission of all power be controlled by the State. Many officials now feel that the State should let other kinds of business operate according to free market principles. It is recognized that the manner in which construction investment is now handled has got to change. At this time the State offers a bid and takes it at the same time, fair competition not being fostered and corruption is rampant.
Dang Van Thanh, the deputy chairman of the National Assembly Economic and Budget Committee, said that flexibility is needed in Vietnam if there's to be a market-based economy. Two local economic experts, Le Dang Doanh and Pham Chi Lan, said that one step towards minimizing funds being lost or misappropriated would be to let private companies take part in large projects. This could lead to a degree of open competition. To the degree with which capital is used effectively, one could expect the economy to grow in a sustainable manner.