| 04:06' 03/04/2008 (GMT+7) | |||
VietNamNet Bridge - Inflation curb is the Government’s top priority. Because inflation, if not put into control, will negatively influence production, people’s life, macro-economic stability, and long- and medium-term economic growth, deteriorating employment and investment environment, said PM Nguyễn Tấn Dũng.
PM urges to curb inflation, stabilize macro-economy and maintain social welfare and sustainable growth PM Dũng clearly pointed out that, due to complicated changes of the world economy and some internal causes of the domestic economy, the first quarter of 2008 saw a high inflation rate. Consumption price rocketed by 9.19% in March compared to December 2007 and the trade gap reached over US $7 billion in favor of import, equivalent to 56.5% of export turnover. These actualities made negative impacts on production, people’s life, macro-economic stability, and business environment.
In its March regular meeting, the Cabinet set it major task to curb inflation, stabilize macro-economy, and maintain social welfare and sustainable growth. “Inflation curb as our top priority, that means we should not run after growth norms set in late 2007. Instead, we should do our best to put inflation into control and decelerate price increase,” stressed the PM. PM Dũng stated that the Government was determined to take seven key solutions: (1) Tighten the purse strings while ensuring the market liquidity and banking system’s operation; (2) Reduce public investments and regular expenses of budget-used agencies, strictly manage investments conducted by State enterprises, and reduce budget deficit; (3) Promote agro-industrial production; (4) Ensure the commodity demand-supply balance, boost export and narrow the trade gap; (5) Enhance thrift practice in production and daily life; (6) Tighten market management to prevent speculation of primary goods; and (7) Further implement policies on social welfare. Concluding the article, the PM affirmed that, it is essential to effectively curb inflation and minimize its consequences through the participation of all State management bodies and authorities at all echelons. He also urged the whole political system, business community, mass media and the entire people to support and join efforts with the Government to fulfill this task. Following is the full text of the PM’s article: STRIVING BEST TO CURB INFLATION, STABILIZE MACRO-ECONOMY, ENSURE SOCIAL WELFARE AND SUSTAINABLE GROWTH By Nguyễn Tấn Dũng I We begin to put the socio-economic development plan 2008 into reality in the contexts of various complicated and unexpected changes in the world economy. The US economy is in serious recession: GDP increased by 0.6% only in the last quarter of 2007, much lower than previous quarters. The US economy is forecasted to grow by 1.5% in 2008. Some experts admitted that the US economy is entering the stage of recession. The US dollar has devalued compared to many other currencies; prices of most of goods in the world market are rocketing (1). The regression of the US economy, which accounts for 25% of the world’s total GDP and over 15% of the total import turnover, has seriously affected and led to the recession of other economies. Prices are sharply increasing in most of the countries, even in powerful economies where low prices have been maintained for years (2). Many countries have readjusted their growth rate by 1-2% (3). If the US economy falls in its cycle of recession, the situations are predicted to be more complicated. Up to now, Vietnam has been deeply integrating into the world economy. We have obtained the total export-import turnover equivalent to 160% of GDP, in which import accounts for nearly 90% of GDP. So, such unpredictable changes in the world market over the past time have negatively affected Vietnam’s growth as well as prices in its domestic market, at a stronger level in comparison with the previous stages and with other countries. Vietnam, during 2006-2007, suffered successive damaging natural calamities and epidemics (economic damage was estimated to be VND 33,600 billion). At the beginning of this year, a prolonged spell of harsh cold in North and Central Vietnam caused great material losses for people’s life and agricultural production (4). In such external and internal realities, weaknesses of the national economy and the economic structure have been exposed, becoming big challenges to the economic management and development. To overcome the situations, the whole people and business community have done their utmost and made use of their strengths to deal with difficulties, maintain socio-political stability, and improve the investment and business environment, laying a solid foundation for higher growth in long and mid-terms. We were able to obtain the GDP growth rate of 7.4% in the first quarter. However, due to complicated changes of the world economy and some internal causes of the domestic economy, the first quarter of 2008 saw a high inflation rate. Consumption price rocketed by 9.19% in March compared to December 2007 and the trade gap reached over US $7 billion in favor of import, equivalent to 56.5% of export turnover. These actualities made negative impacts on production, people’s life, macro-economic stability, and business environment. II In its regular meeting in late March 2008, through thorough discussions, the Government agreed to set its major task to curb inflation, stabilize macro-economy, and maintain social welfare and sustainable growth. The inflation curb is considered the Government’s top priority. Inflation, if not put into control soon, will negatively influence production, people’s life, macro-economic stability, and long- and med-term economic growth, deteriorating employment and investment environment. Saying inflation curb as our top priority, that means we should not run after growth norms set in late 2007. Instead, we should do our best to put inflation into control and decelerate price increase. In this spirit, the Government plans to ask the National Assembly to reduce the growth norms and readjust the inflation index commensurate to the realities. Such readjustment is necessary to focus on the top priority, bringing about good preconditions for high and sustainable growth in the following years. The Government has been concentrating on directing the realization of these main tasks and top priorities. To fulfill the above-mentioned tasks and goals, the Government agreed to take the following solutions in a consistent and drastic way: First, tighten monetary policies. Among numerous causes of inflation is always monetary one. The monetary supply and credit debt balance continuously increasing since 2004 and sharply went up in 2007 are important causes of inflation. Being aware of this, the Government decides to strictly control the total means of payment and the total credit debt balance right at the beginning of this year. The State Bank must soundly exploit flexible monetary tools and policies in line with the market rules in order to fulfill this goal. It is important to maintain the economy’s market liquidity and the performance of banks and credit organizations to facilitate production and export activities. Second, reduce public investments and regular expenses of budget-used agencies, strictly manage investments conducted by State enterprises, and reduce budget deficit. The investments using the State budget and carried out by State-run enterprises currently account for 45% of the total social investment. By reducing this source, the demand pressure and trade gap will be lowered, helping to raise the economy’s efficiency. The Government will present specific reductions applied for investment capital and administrative costs. All ministries and local authorities are required to find out ineffective or unnecessary projects. This work will be drastically conducted, even in reallocating and balancing the capital sources. In this spirit, the Government urges all ministers and chairpersons of all centrally-administered provinces and cities, as representatives of the State ownership, to strictly supervise investment items made by State-run enterprises and resolutely remove ineffective ones. Meanwhile, the projects about to be finished or those on commodity production must be facilitated and put into operation as soon as possible. Third, promote agro-industrial production and quickly handle all consequences caused by unfavorable weather and epidemics in order to raise food output. At present, Vietnam’s potential to develop is great, especially after fully joining the World Trade Organization membership. Foreign and private investments are strongly going up; export market is expanded. Thus, it is a basic solution to boost production in order to increase supplies to the domestic market and exporters, curb inflation, narrow the trade gap, and give a push to economic growth, without any side-effects. The Government assigned ministers and provincially-level chairpersons to timely lift all difficulties in terms of capital, market and administrative procedures in order to promote production activities. Fourth, ensure the goods demand-supply balance, boost export and narrow the trade gap. The demand-supply balance of goods, especially primary ones for production and people’s life, is a decisive precondition to prevent sudden price increase and speculation. The Prime Minister and ministers have been working with associations and enterprises trading in primary commodities (food, medicines, petroleum, steel, building materials, fertilizers) and assign them to keep supplies and prices in control. While executing the consistent policy to adopt a market price mechanism and abolish all price subsidies, the Government decided not to put up prices of electricity, coal, petroleum and stabilize those of cement, fertilizer, clean water, medicines, train and air tickets until late June. The Ministry of Finance was entrusted to consider some fee reductions for farmers. To guarantee food security and restrain the price escalation of food at home, the Government fixed the 2008 volume of rice export at 4 million tons and not more than 3.2 million tons by the end of the third quarter. The Government assigned the Ministry of Finance to propose a plan to raise export tax imposed on coal and crude oil as well as consider possibilities to impose export tax on rice. The US dollar is devaluing in comparison with the currencies of the countries which are Vietnam’s export markets and the current exchange rate between Vietnamese dong and US dollar not reflects the real relationship in the foreign exchange market. So, the Government intended to apply a flexible exchange rate with proper margins, as a means to curb inflation in favor of export and the trading of foreign currencies. The trade balance is a very important macro index. The excess of imports over exports in 2007 and the first quarter is threatening the macro-economic balance. This situation must be settled through boosting export and controlling import. The Government is directing the realization of various solutions: The State Bank must provide a sufficient source of capital to exporters, purchase all of their foreign currencies, and immediately deal with credit obstacles. It must also further support trade promotion for exports; boost administrative procedures reforms in export activities to reduce costs and improve competitiveness of Vietnamese exports; and apply technical barriers and other measures in conformity with Vietnam’s international commitments, even raising import tax on unessential goods. Fifth, enhance thrift practice in production and daily life. At present, the prodigality is quite popular in production activities and daily life. The possibility for thrift in production and consumption is extremely high. So, the Government requests all State agencies to cut down 10% of their administrative expense and all enterprises to check their expenditures in order to down cost price and circulation fee. The Government calls upon everyone and every family to save fuels and energies. This solution will help to reduce the demand pressure and trade gape as well as increase the production efficiency. Sixth, tighten market management and supervise the obedience of laws on price. We must prevent speculation of primary goods (especially petroleum, steel, cement, medicines, and food) and cross-border smuggling (particularly petroleum and minerals). Businesses in all economic sectors must regularly check the selling price applied by their retailers and agents. The Government ordered State-run corporations to take the initiative in observing this task and be responsible to the Government for the operation of retailers and agents. The Government also asked associations to actively take part in and support these policies and solutions to stabilize the market and prices. Seventh, further implement policies on social welfare. The price escalation has been affecting people’s life, especially the poor and disadvantaged households, natural calamity-stricken victims, and low-income laborers. So, the Government concluded to enlarge its policies on social welfare. The Government decided a 20% increase in the minimum salary of employees in State agencies, armed forces, political and socio-political organizations since January 01, 2008. The Government also decided to raise the minimum wage for Vietnamese employees working in foreign-invested enterprises, foreign and international agencies/organizations in Vietnam, for foreign individuals working in Việt Nam, for laborers working for all Vietnamese companies, enterprises, cooperatives, farms, households, individuals and other labor-using entities. For trained laborers (including those trained by enterprises), the minimum salary was at least 7% higher than the regional minimum wage. Besides, pension and social insurance allowance was raised by 20% for about 1.8 million retired people and over 1.5 million contributors to the revolutionary cause. Recently, the Prime Minister issued Decision 289/QĐ-TTg on some policies to assist ethnic minority people, beneficiaries of social policies, poor households, and fishermen. Accordingly, an annual sum of money equivalent to 5 liters of kerosene will be given to ethnic minority people and poor households in the localities out of the electricity coverage; the pension for health insurance for the poor is raised from VND 80,000 per person per year to VND 130,000; 50% of the nominal value of health insurance cards is subsidized for members from the sub-poor households who purchase voluntary health insurance; fishermen are partly funded to buy or build their new fishing boats or other ships to serve aquaculture; they are financed to replace their ship engines with fuel-saving ones; the insurance costs for the hull of fishing boats or other ships to serve aquaculture and for accidents suffered by contracted sailors will be partly granted; fuels will be supplied to fishermen who own fishing boats or service ships. The Government decided to stabilize tuition fees and hospital fees as well as grant preferential loans to disadvantaged students of universities, colleges, and vocational schools. Natural calamity-stricken households will be provided with rice allocated from the national reserve, without any fee (5). At the same time, we should speed up the implementation of national goal programs and other supportive measures in disadvantaged areas. It is important to pay set up an effective supervision mechanism to ensure that the State aid is not peculated. III Disiflation is a hard duty. To successfully curb inflation and minimize its consequences, it is essential to mobilize the participation of all State management bodies and authorities at all echelons. The world market is changing, so it is necessary to update information to be able to timely take accurate measures in order to minimize negative impacts and make full use of new opportunities for the country’s development. The Government is fully aware of its responsibility to the whole people for deflation. However, this work will be conducted with best results through great support and joint efforts from the entire political system, business community, mass media and all people. The tasks are tough, difficulties and challenges are big, but good chances and potentialities for higher economic growth are great. We are confident that, under the leadership of the Communist Party of Vietnam and with great determination and joint efforts of the whole nation, we will succeed in curbing inflation, stabilizing the macro-economy, maintaining social welfare and sustainable economic growth, and fulfilling the 5-year plan 2006-2010 put forth by the 10th Party Congress. N.T.D (1) Price of crude oil in the first quarter of 2008 increased by nearly 40% compared to the average price in 2007 and is predicted to maintain high. It is even forecasted to reach higher, up to US $150/barrel. Price of steel in early 2008 went up by 45.1% against late 2007, currently US $900/ton. Prices of urea fertilizers, wheat flour, and rice doubled in March 2008 in comparison with last year. (2) Consumption price in China in February 2008 rose up 8.7% against the same period of 2007. Meanwhile, the increase was 2.7% in February 2007 compared to February 2006. In Thailand, the figures were 5.41% against 2.32% respectively; Philippines 5.36% against 2.64%; and the Euro-using market 3.2% against 1.84. (3) In 2008, many countries have readjusted their growth norms to cope with the situation: the USA 1.5% (last year 2.7%); Euro-using market 1.6% (2.6%); Japan 1.5% (1.9%); China 8% (11.4%). (4) During the harsh cold spell in early 2008, about 200,000 ha of rice, 18,000 ha of rice seeding, 25,000 ha of vegetables were damaged, and 180,000 heads of cattle froze to death. The total loss was estimated to reach VND 1,000 billion. (5) In 2007 and first three months of 2008, nearly 80,000 tons of rice from the national reserve were provided to victims of natural calamities, without any fees. |
Wednesday, 2 April 2008
PM emphasizes disiflation, macro-economic stability, social welfare and sustainable growth
