EXPLANATORY REPORT AND ANSWERS GIVEN BY PM NGUYỄN TẤN DŨNG

At the 3rd sitting session of the 12th National Assembly

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Dear NA deputies,

Dear compatriots,

On behalf of the Government, I would like to send sincere thanks to all NA deputies, comrades, compatriots, and mass media who have shown their high consensus to the Government's report on curbing inflation, stabilizing the macro-economy, ensuring social security and sustainable growth. Many NA deputies presented their profound analysis on the actual situations and causes as well as clearly pointed out more tasks and specific measures. Some proposed to clarify the responsibilities of every Cabinet member in the Government’s management work and asked the Government to give more foundations for its proposals to readjust of growth and inflation norms, tighten budget spending, reduce public investments, increase investment efficiency, narrow trade gap, put forth monetary policies and tightly control commercial banks. They requires the Government to give more details why many State-run economic groups and corporations do business out of their main competence; how to ensure food security and improve farmers' livelihood; how to control of prices of primary goods; how to guarantee social security for the poor, low-income workers and civil servants; and how to speed up administrative reforms and anti-corruption.

The Government gratefully acknowledged all these sound comments from the NA deputies, comrades and compatriots. The Government will do its best to carry out successfully all the goals, assignments and solutions approved by the NA.

At this sitting session, 132 NA deputies sent 297 questions to the Government, PM and many other Government members. The PM asked his Cabinet's members, on their own competence and obligations, to answer in writing all the questions. Over the past two days, five Ministers have directly entered the NA interpellations. On behalf of the Government, I would like to talk more about some issues of public concern.

I

SOME SKETCHES OF SOCIO-ECONOMIC SITUATIONS IN MAY AND FIRST FIVE MONTHS

In May, the economic growth still keeps on its track, some sectors get advanced. The Spring-Winter rice crop in the South increases both in productivity (3.7%) and yield (5.8%). The Spring-Winter rice crop in the North is well on track; the overall area of food crops and vegetables has increased fairly well against the same period last year. Pig herd has gone down by 3% due to blue-ear pig disease, but ox herd has increased by 3% and fowl 6%. The aquaculture output has risen up by 8.1% compared to the same period of 2007. Industrial productivity value has jumped up 3.4% in May against April and 16.4% in the first five months over the same period last year. FDI continues its growth, with 130 new projects licensed, totally worth of US $7.4 billion; then the total number of licensed projects in the first five months reached 324, with the total registered capital of US $14.7 billion, going up 160% against the same period of 2007. Export value of almost all products in the first five months has increased, and the total turnover reached US $23.4 billion, up 27% over the same period. Import value in May is estimated to go down by US $200 million compared to April. Therefore, the May trade gap is 55.3%, which, though still a high figure, is lower than that of April (64.7%). Services and tourism have also experienced well performance. The total retailed sale of goods and services has increased 29.7% in the first five months in comparison with the same period.

Scientific and technological, socio-cultural activities, and poverty reduction continue to be implemented on schedule of the yearly plan.

National defense and security have been maintained; social order and safety stabilized.

Apart from those good results, there are still two big socio-economic issues: (1) the consumption prize continues to rocket up, further making the livelihood of the poor and low-income people very difficult; (2) the trade gap remains so high, threatening the macroeconomic stability.

The domestic market price: the prices of almost all goods and services in May have slightly gone down or increased at 0.3% to below 2%. However, there is a sudden increase in food price to 22.19%, pushing the May consumption price up again (3.19%) after two months of slight decrease (March: 2.99% and April: 2.2%). Thus, in the first five months, an increase of 19.09% has been seen over the same period last year. The food price increase is mainly resulted from the food price escalation in the world market. Moreover, the groundless rumors and speculation in late April in some localities contributed to the sudden increase of food price.

The poverty realities: According to localities' reports, until May 21, 2008, there are 181,600 households nationwide, with 766,900 inhabitants, living in poverty and shortage, accounting for 1.6% of the households and 1.5% of the agricultural population, doubling the figure of the same period last year. The main reasons are the storms and floods at the end of 2007 and the prolonged harsh coldness in early 2008. The Government has sent 23,000 tons of food and VND 9.3 billion to those households. The Government will speed up the supportive work to the people in order to help them overcome consequences of natural disasters and recover the production activities.

With the great efforts made by the whole Party, people, and army, the country's socio-economic actualities in the first five months, though still facing difficulties, have been stable. The achievements gained in the first five months will consolidate our confidence and effort to successfully curb inflation, stabilize the macro-economy, ensure social security and sustainable growth.

II

READJUSTMENT OF GDP GROWTH NORM AND INFLATION RATE 2008

1. Readjusting GDP norm

As reported to the NA, the socio-economic situations in the first five months show that it is unpractical to reach the GDP growth rate of 8.5-9% or higher as set out in the socio-economic development plan 2008. Based on the realities, the Government asked the NA to consider the readjustment of the GDP growth rate 2008 down to 7%. The majority of the NA deputies agreed with the Government's proposal and asked for clearer foundations of the readjustment. Some deputies even proposed to maintain the original norm which was set in early 2008. The Government would like to give more information as follows:

GDP growth is an overall norm, measuring the economic development in a certain period. This is an index of orientation which is also an important foundation to make policies, allocate resources and calculate other norms in the development plan. Therefore, it is an essential ground in operating socio-economic activities.

- To fulfill the top priority of reining inflation, we have tightened monetary policies (constrain the increase of the overall means of payment and total credit balance); checked and adjusted public and State-run investment as well as cut down budget expenditure; given more budget to social security. Those solutions may reduce resources for growth. Besides, there are also many other reasons: the price increase in the world market leads to the high input costs; economic difficulties faced by our main trade partners cause difficulties to Việt Nam’s exportation; foreign indirect investments tends to go down. Although the first quarter GDP went up by 7.4%, it started to slow down and was much lower than the plan. Evidently, it is practical and necessary to reduce the set GDP growth rate.

- To identify a specific growth norm of 2008 in the spirit of curbing inflation and maintaining sustainable growth, the Government assigned the Ministry of Planning and Investment (Central Institute for Economic Management) to collaborate with some domestic agencies and international organizations in calculating all growth possibilities in three scenarios. Consequently, the basic growth rate is fixed at 7.2%, the high one 7.6% and the lowest 6.7%.

After considering all aspects, the Government proposed the NA to adopt the GDP growth rate of 2008 at 7%. This figure is not too different from the forecasts given by some international organizations and the trend in many other countries to reduce their growth rate by 0.5-2% to cope with the current high price escalation and inflation.

The importance, as reported by the Government to the NA in the opening ceremony of this sitting session, is that, in implementing socio-economic development tasks, we should give an eye on realities, obtain updated information, do careful and thorough analysis and consideration to adopt proper policies and responses in order to minimize negative impacts generated by newly arisen difficulties. On the other hand, we should quickly grasp all new opportunities and bring into play the country’s potentialities and strengths.

2. Identifying inflation rate 2008

When discussing on inflation situation and index in 2008, many deputies raised two questions: First, why the inflation in Việt Nam is much higher than other countries facing the same impacts of natural calamities, epidemics, oil, food and material price escalation?; and second, why the Government proposed to actively curb inflation and price increase; through various solutions, to gradually pull down consumption price escalation but gave no specific figure. These are important and good questions.

- For the reasons why the inflation rate in our country is much higher than that of other countries, the Government had already reported to the NA at the opening ceremony. Now I would like to give more explanations:

First, ineffective investments have led to the low competitiveness of our products and economy. This is a profound reason which has remained unsolved for years.

Second, food price can cause a great and direct impact on consumer's price index (CPI). Due to low per capita income and living standard, the majority of our people have to spend largely their income on food. This group of goods accounts for 42.85% of the CPI-based commodity structure. Its price has also increased highest in recent successive years. Since 2004, food has taken from 50% to 80% of the total consumption price increase[1], not to take into account the fact that high price of food and foodstuff are the stimulators for the price escalation of other goods and services. In May 2008, consumption price increases by 3.91% due to the food price rockets up 22.19%, the highest so far, while prices of almost all the goods have an lower increase compared to April 2008.[2]

Third, our country’s import turnover is approximate to 90% of GDP, therefore the world price fluctuations will widely and deeply affect the domestic market. Recently, prices of many kinds of goods in the world market have sky-rocketed, many of which are our major imports with great quantity. This leads to "import inflation". On the other hand, many other countries in the region have raised the value of their currencies over the US dollar. Meanwhile, Vietnamese dong’s going down in price helps to facilitate export activities and also exacerbates "import inflation".

Fourth, during the transformation to the market economy, we have proactively adjusted prices of some State-controlled products. This is very necessary and must be carried out in a roadmap to gradually eradicate compensation for losses and by-price subsidy. Although our new prices are still lower than those in the world market, all the price readjustment will result in price increase at home.

Fifth, since 2003 until now, we have continuously raised salary at least 20% up. Wage increase is necessary. We have persistently conducted this work though we know that it will pay the way for the increased circulation of money, causing more pressures and “price-increase” effects.

- Identifying inflation rate in 2008

Inflation in our country, apart from such causes generated by fiscal and monetary policies and other internal factors, is also resulted from external ones: the food price escalation in the world market pushes the domestic price up. This is inevitable, not only for import countries but also for exporters, including Việt Nam; natural calamities and epidemics still goes in unpredictable ways; the prices of oil and US dollar continue to change dramatically and unpredictably; moreover, psychological effect is also a factor for the formation of prices in Việt Nam. These complicated factors are intermingling while there are only seven months left till the end of 2008. So it is difficult to have the firm foundations to represent to the NA a specific figure of price increase. Thus, the Government asks the NA to adopt the target of reining inflation in 2008 as follows: “To proactively curb inflation and price increase; through various solutions, to gradually pull down consumption price escalation” to reach a one-digit figure within several years to come.

Generally speaking, we cannot immediately control inflation with subjective efforts. Furthermore, to avoid negative impacts on the economy, it is not necessary to reduce inflation suddenly.[3] Relying on experience in reining inflation of Việt Nam and some other countries in the 1980s and early 1990s, it takes time to lower inflation rate.

Apart from that, as I mentioned above, due to the seasonal changes of supply and demand of many goods under their own principles, the price changes may vary from month to month, from quarter to quarter. In such the context, the tendency of price movement is the most importance. We must drive the consumption price down. This is an urgent and feasible requirement.

With the above analysis, I would like to ask the NA to accept this proposal of the Government.

Given to poverty reduction index and other norms, the NA can assign the Government to strive best, relying on the actual growth and inflation curbing, in order to obtain the highest as possible.

III

SOME ISSUES OF PUBLIC CONCERN

1. Checking and rearranging investment projects

To curb inflation, the Government has directed the consistent implementation of eight groups of solutions, including checking and rearranging public investments, investments using Governmental bond capital, and investments made by State-owned enterprises (SOEs); seriously save regular budget expenditure. The NA deputies showed their agreement with this guideline and asked the Government to drastically carry out it. The Government would like to present the following report:

- Rearranging public investment projects

Normally, when the prices of materials and equipment increase, the Government has to grant additional capital to compensate for price slippage and give more capital for projects funded by the State's budget. This year, although the prices of materials and equipment have witnessed a dramatic increase, the Government still maintains the total investment capital allocated at the beginning of the year. At the same time, the Government orders to check, cut down, and postpone the ineffective and behind-schedule projects and works to pour capital in effective ones that can be finished right in 2008 or 2009. This is a difficult task. However, ministries, sectors and localities have been determined to realize the guideline. Up to May 28, 2008, 28 ministries, sectors, central bodies, 43 localities and eight State-run groups and corporations reported that the number of delayed projects in the plan 2008 was 995, with the total State budget capital of VND 3,983 billion, accounting for 7.8% of the total budget investment capital. They are continuing proactively and promptly this work. The PM assigned the Ministry of Planning and Investment to supervise and speed up the realization of the Government's guideline.

- For works and projects using the Governmental bond capital

The Government wants to resolutely check and postpone the projects and works of which the investment procedures have not been finished. In this spirit, after checking, it is estimated to cut over VND 9 trillion in the total investment capital from the Governmental bond, equivalent to 25% of the plan 2008.[4] At the same time, the Government allows to disburse the capital for the completed work volume in surplus of quick-operating projects and considers to add more capital to ahead-of-schedule projects, effective and key socio-economic works.

- For investment efficiency

Some NA deputies commented that, the inefficiency of investment has lasted for years and the ICOR[5] increases so high. They asked the Government to clarify causes and present solutions.

According to some calculations, in the period of 2002-2007, Việt Nam's ICOR ranged from 4.5 to 5.3. So, to make a penny of GDP, it required 4.5 to 5.3 pennies of investment capital. Our ICOR was higher than that of some countries in the same stage of development [6], because:

Due to the inadequate planning and weak management, investment is scattered. Many works are prolonged. Prodigality, loss, and inefficiency in investment activities can be widely seen. Our country’s growth is still extensive. The contribution of capital to the growth tends to go up, while that of labor down and of other factors - technical and technological advances, manpower quality, management – still low.

Over the past time, investment capital for socio-economic infrastructure in rural and remote areas has accounted for a percentage though it is far to meet the expectation. This is a necessary work, reflecting the Party and State's care for farmers and people in disadvantaged areas, and meeting the requirements for sustainable development. Those works have helped to speed up goods production and circulation, improve people’s living conditions and travel. However, they have not quickly brought about added values to the economy.

To raise investment efficiency, the Government has directed the implementation of consistent solutions, focusing on such key ones like: tightly managing investments using the budget and made by Stated-owned enterprises; perfecting institutional system; increasing the quality of planning and assessment work; heightening responsibilities of investors and investment decision makers; enhancing inspection and supervision of the competent bodies and the whole society.

2. Saving regular budget expenditure

The Government has ordered to save 10% in regular expenditure in the rest eight months of 2008, besides the 10% saving set out in early 2008. The Government has issued a Resolution on this issue. The Ministry of Finance has offered specific instructions. According to reports, about VND 2,700 billion have been saved.

The PM assigned the Ministry of Finance to continue checking the serious implementation of this policy.

3. Operation of the State-run economic groups and corporations

After the process of transformation, renovation and development of SOEs, now we have eight State-run economic groups and 96 corporations mainly operating in the model of parent-subsidiary companies. 74% of subsidiaries are joint-stock companies with many owners. According to the Ministry of Finance's report (based on reports from 76 groups and corporations)[7], business performance of the State-run groups and corporations in 2007 was fairly high in comparison to 2006: most of these enterprises earned benefits.[8] Their total ownership capital was VND 377 trillion, rising up by 18%, mainly from profits. Their total assets in 2007 increased by 26%; their total revenue by 24%; their total profits by 23%; and the profit-ownership capital ratio reached 17% (16% in 2006). The value of goods and services output accounted for 40% of GDP, contributing 28.8% of the gross domestic income (excluding crude oil and ex-import tax).

Despite their low business efficiency and competitiveness, the SOEs have played an important role in stabilizing the macro-economy, ensuring the supply-demand balance, stabilizing the prices of primary goods, carrying out many infrastructure projects and public works in the areas of socio-economic disadvantages. Some enterprises have established their prestigious trademarks; invested in technical transfer and qualified staff; undertaken many work items for which they previously had to hire or buy from the other countries.

Recently, some people have showed their concern about the capital mobilization of SOEs and their investments in such fields as real property, securities, finance, banking, which are not their main industries.

According to the Ministry of Finance, until December 31, 2007, the total mobilized capital (including local, foreign, short-term, long-term loans and other debts) of 76 SOEs reached VND 514 trillion, 1.36 times bigger than their ownership capital. In general, it is still safe in terms of finance. Some enterprises obtained a higher mobilization. The Government has asked the Ministry of Finance to check and assess the reality to apply proper solution for each case.

Also by December 31, 2007, 13 groups and corporations poured money in securities and finance funds, worth of VND 1,061 billion in total, accounting for 0.31% of their ownership capital and 0.13% of their total assets; 19 in founding joint-stock commercial banks (VND 4,46 billion, equivalent to 1.3% and 0.55% of their ownership capital and total assets respectively); 13 in establishing 15 securities companies (VND 420 billion, 0.12% and 0.05% respectively); 18 in real estate (VND 1,463 billion, 0.43% and 0.18% respectively). In general, the total investment capital poured in these three fields was VND 7,370 billion, a figure not small nor too high in comparison with the SOEs’ ownership capital and total assets.

The Government and the PM are fully aware that, the SOEs are operating in key sectors of the economy, holding a large volume of the national property, foreign debts and domestic loans. Their performance can cause great and direct influence on the macro-economic stability, quality and competitiveness of the national economy. Thus, their operation must be tightly monitored and assessed fully, seriously, and transparently through independent and trustworthy auditors, so as to adopt proper solutions to remove their weaknesses and raise their responsibilities and efficiency in the cause of national development.

It is important to quickly identify the main role of State-run economic sector, in which SOEs function as a leading force, to avoid contradictions, even internal contradictions, when rearranging and renovating SOEs in line with the Party's guidelines: "Developing an economy with different models of ownership and different economic sectors, in which the State-run sector plays the leading role; the State and collective economic sectors must become a firm ground for the national economy"[9] and "setting up some powerful economic groups on the basis of State-owned corporations, with the participation of other economic sectors. These groups will engage in various business activities, including the main and highly-specialized field, and undertake a dominant role in the national economy...”[10]

The Government is guiding the preparation for reviewing the pilot realization of economic groups and the designing of a decree on State-run economic groups. In the short term, all investments made by State-run economic groups and corporations in securities, banking and real estate must be tightly supervised. At the same time, it is necessary to speed up the transformation of State-owned enterprises (SOEs) in line with the set plan, in which the fundamental solution is to effectively carry out equitization, form the multi-ownership in SOEs, forge momentum and a dynamic management mechanism, and increase the supervision of shareholders and the society. Thus, SOEs can play their important role in the socialist-oriented market economy of Việt Nam. The Government orders all ministers and chairpersons of the provincial-level People’s Committees, as the representatives for the State owner, to instruct and supervise the implementation of this task.

4. Measures to down the excess of imports over exports

As a developing country targeting industrialization and modernization, trade gap is a normal issue if it stands at a reasonable level. Nevertheless, in the first four months of this year, the excess of imports over exports at 64.7% was too high, causing negative impacts on our international balance of payment and macro-economic stability. Hence, the Government considers reducing the trade gap an important task, for which the fundamental solutions are to promote export and tighten import control.

Despite the world’s sharp price fluctuations, Việt Nam’s export in the first five months has increased 27.2% against 22% in the same period last year. If we continue to effectively take measures to lift current difficulties, the overall export in 2008 is expected to go up by 26% (the plan: 20-22%). This target is too high, demanding great efforts to achieve.

In the first four months, the export turnover of almost all groups of commodities surged in comparison to the same period of 2007. This is resulted from the fact that import prices increased and many goods were imported in great quantity [11]. Together with the implementation of strict finance and monetary policies to reduce demands in some fields, the Government has directed competent agencies to take appropriate measures, including taxes and technical barriers, in order to limit the import of some unnecessary commodities or replaceable goods. According to initial statistics, the import in May decreases by over US $200 million against the previous month. Thanks to high export and lower import, the trade gap is 55.3% in May, though rather high, going down in comparison with April (64.7%).  

The Government advocates the further effective realization of consistent solutions to speed up export and limit import, ensuring the sufficiency of primary commodities for production and consumption, striving to bring the trade gape down to the level of 2007 (about 30%). In order to obtain this significant macro-economic norm, contributing to the national socio-economic stability and development, enterprises should proactively balance their import demand and process; exploit and consume domestic products; prevent losses, and save fuels, materials and energies. The Government orders all offices and agencies to call upon all individuals to support thrift practice in production and consumption, provide more resources to production and business promotion, practically help the nation overcome difficulties to enter the stage of stability and growth.    

5. Initiative to manage prices, ensure food security and improve farmers’ livelihood

Prices and price control are the topics drawing much attention of NA deputies and voters. One of the main targets in Việt Nam’s renovation process is to establish a State-managed market mechanism,, including the area of price. The price control in line with market principles means to diminish price subsidy and goods prices are basically determined by the supply-demand relationship. The State will regulate the market and prices chiefly with macro-economic tools. The State only controls prices of monopoly commodities and services which will be not compensated for losses in the future.

Few years ago, the Government defined the itinerary to apply market prices to some goods directly managed by the State in terms of prices. Accordingly, the price of these items will be raised through reasonable steps, so as to fully apply market prices for these goods in late 2008. At the second session, the 12^th NA made decision on the 2008 missions, including the designing and publicizing the roadmap to endorse market prices for some types of State-supervised commodities and services.  

Nevertheless, in late 2007 and early 2008, the inflation has been surged. Thus, to prioritize inflation curbing and social security, the Government has decided not to raise the prices of electricity, petroleum, coal, clean water, air fee, train charge and bus fee until the end of June. The Government will rely on the actual inflation and market fluctuation to adopt a comprehensive and reasonable solution for adjusting the price of each type and group of commodities under the principle that the State, enterprises and consumers share both benefits and burdens. The State pledges to provide assistance to the weaker. The Government will not spontaneously increase prices of those commodities after June.

While insisting on the policy of market prices, prices will be managed in line with the following orientations:

- For goods directly managed by the State in terms of prices, prices must be adjusted based on the results of inflation curbing, impacts of price adjustment on the market and people’s livelihood. In case adjustment is in need, a reasonable itinerary must be outlined.

Particularly, concerning petroleum, due to its complicatedly rocketing prices, the Government is giving a big compensation for losses [12]. In the context of inflation, any price adjustment for oil and gas must be carefully considered, taking into account the compensation capacity of the State budget; the results of inflation curbing; the impacts on other goods, and the assistance to the poor. At first, oil importers have to guarantee their reserve, save costs, and insist on the principle of “profit compensates loss”. It is necessary to take strong measures to prevent petroleum speculation and cross-border smuggling.

- Regarding to food price management, as saying before, in Việt Nam, food holds a significant percentage in the CPI-based goods structure and is directly and strongly influenced by food price in the global market. At present, as inflation curbing is the top priority, food price management has become extremely important. 

Việt Nam has applied market prices for food for a long time. This marks a big leap in the renovation process. The control of food prices mainly affects the demand-supply relationship through accelerating the production, regulating export and maintaining domestic food provision.

This year, the total rice yield is expected to reach 36.3-36.5 million tons, enough for domestic consumption. There are 8.3-8.5 million tons of rice (or 4.1-4.2 million tons of husked rice) for export.

The Government wants utmost to ensure national food security in any case, keep domestic rice price at acceptable levels, and purchase all rice from farmers at the profitable price, and export rice in proper quantity and pace.

Since 1989, Việt Nam has exported around 60 million tons of rice, 3 million tons each year on average. In recent ten years, the yearly amount of exported rice has reached over 4 million tons, particularly over 4.5 million tons in 2007. Since the beginning of this year, facing natural disasters and epidemics at home, the Government decided to export 3.5-4 million tons totally in 2008, with a reasonable pace. The Ministry of Agriculture and Rural Development and the Ministry of Industry and Trade were entrusted to propose the adjustment of pace and quantity of exported rice in the rest months. In the first four months, after balancing the domestic rice demand, the amount of marketable rice is 5 million tons (or 2.3 million tons of husked rice) [13]. In the first five months, we continues to maintain a reasonable export pace, and the volume of exported rice reached over 2.1 million tons, the turnover at US $1.17 billion, increasing 12.9% in quantity and 94% in value against the same period last year.

In Việt Nam, over 90% of marketable rice output comes from the Mekong Delta. Many years ago, rice price stood low, the Government set out the orientation for the management of rice purchasing price to ensure a 40% net profit for peasants. The orientation was widely accepted. In recent years, despite high producing costs, and high prices of goods and service, peasants still enjoy higher profits which must be maintained at a reasonable level. In the Spring-Winter crop, input costs strongly increased, but, thanks to higher rice selling prices, the net profits still remained over 85% [14], a significant increase in comparison with the same crop last year (70%).

However, in fact, the living standards of peasants are still low and farmers are enjoying smaller benefits from the developing process than others. Nevertheless, the improvement of living standards of peasants should not be done through raising prices of agricultural products, especially rice. The Government is instructing the preparation of a project on agriculture, peasants and rural areas, proposing consistent measures to further raise the living standards for farmers in the coming years.

Together with rice export management, the well-done rice provision at home is another important factor to ensure food security and rein inflation. The occurrence of rice shortage and local price fever in late April is avoidable when our reserve of marketable rice is abundant and the high productivity and yield of rice is expected in the upcoming harvest. The main causes were the speculation and the poor performance of local agencies

One of the important measures to ensure a sustainable food security is to further strengthen the management and use of agricultural land, especially rice-cultivating lands. The Government is proactively instructing the implementation of resolutions of the 11^th NA on the overall planning and the five-year land use plan (2006-2010) of the whole country, so ast to maintain 3.86 million hectares of rice-growing land by 2010, including over 3.3 million hectares of two-crop land. Every local authority has to supervise the implementation to limit the conversion of rice-growing land into other activities. In addition, the Government will consider the issuance of reasonable mechanisms and policies to ensure legitimate economic interests of rice cultivators.

- To stabilize prices, the most importance is to speed up production to increase supplies for domestic consumption and export, guarantee the demand-supply balance nationwide and in each area, and prevent local imbalance. The Government entrusts State-run economic groups and corporations, and associations to heighten their responsibility in organizing the distribution network, supervising operations of their retailers and agents, selling at exact prices in accordance with contracts.

6. To fruitfully ensure market information work and proactively prevent speculation

Information has fast and strong impacts on market prices. Inaccurate information can make the market unstable, damage people, and in the current situation, create more difficulties for reining inflation. For example, the occurrence of rice price fever in April rooted from the ineffective information work. In fact, the Government’s regulations on information provision have not been implemented well. To deal with this issue, the Government orders:    

State management bodies should be proactive in providing official information to people and mass media on the socio-economic situations, demand-supply relationship, market, and prices, so that people and enterprises can respond the case properly.

An effective information network should be established at all echelons in order to timely correct inaccurate information and rumors in the public as well as provide reasonable adjustments to prevent negative impacts on the stability of market and prices.

Mass media agencies are obliged to give accurate and responsible information. They should not broadcast any news which may pose negative impacts on prices and market, inflation curbing, and people. They are also responsible to disseminate the Government’s policies and market management.

The Government recommends people believe in official information provided by State agencies and be cautious about rumors. The Government entrusts competent bodies and local authorities to supervise and seriously punish the dissemination of inaccurate information which make the market unstable. 

The Government will consolidate market management, applying tough measures to prevent and fight against cross-border smuggling of petroleum, coal and minerals.

7. Bettering social security

Ensuring social security is both the goal and the requirement of sustainable development. Over the past years, apart from boosting economic development, the Communist Party and the State of Việt Nam have always attached importance to policies on social security, giving special attention to job generation, income, improvement of living standards, poverty alleviation, assistance to beneficiaries of social policies and the disadvantaged. 

Việt Nam has already formed a system of social security policies, with numerous fruitful programs, projects and solutions, particularly for poverty reduction, which are widely supported by the common people and highly appreciated by the international community. Recently, to deal with natural disasters, epidemics and high inflation, the Government has issued more policies to promptly aid the poor and the disadvantaged.

To ensure social security in the coming time, a key task is to well realize the issued policies, first of all, to allocate enough capital, formulate a mechanism of implementation and close supervision over the State’s assistance without losses. The latest reports on budget spending and food assistance to natural disaster-hit victims in 2007 in eight provinces, made by different investigation teams of the Ministry of Finance, demonstrate that local authorities have tightly instructed the implementation without losses and corruption. Nevertheless, the emergency relief work was carried out slowly; and the aid was sometimes given improperly.

Together with successfully endorsing the issued policies, it is necessary to timely revise and supplement them in line with the reality. In addition, new policies and mechanisms on social security should be continuously researched. During this sitting session, NA deputies have approved the measures to ensure social security as raised in the Government’s report and contributed practical opinions to bettering social security.[15] The Government is greatly grateful to these comments.  

Regarding to the revision of poverty line, between 1993 and 2006, we adjusted five times in accordance with the country’s socio-economic realities, approaching the international standard. Each revision helps to raise the number of beneficiaries. We are applying the poverty line set in 2005.[16] In the context of natural disasters, epidemics and high inflation, many deputies have raised their concerns about readjusting the poverty line; the Government has acknowledged the importance of the task and instructed the readjustment as reported to the NA at the opening ceremony. The Ministry of Labor, War Invalids and Social Affairs already presented different options for adjusting the poverty line, which take into consideration of the country’s average rising income and inflation. The readjustment will become useful only when localities, relying on the new line, conduct serious and exact surveys on their number of poor households, and realize effective action programs on sustainable poverty alleviation.     

Concerning to salary and livelihood: Depending on their specific conditions, each individual or group of people can have different feelings about the impacts of rising wages on their life in the present context of high inflation. According to statistics, since 2003, after five adjustments, the average salary of a civil servant has been raised 2.38 times, while consumption price has gone up 70.22%,[17] other policies on social subsidy have been considerably improved. However, in late 2007 and early 2008, to cope with high consumption prices (especially food), the Government, observing the Political Bureau’s conclusion [18], has been guiding the preparation of necessary conditions for raising wages for non-productive administrative staff, officers and soldiers of the army, workers in enterprises, and other policy beneficiaries with a view to easing negative impacts of the high inflation.

8. Boosting the implementation and responsibility of Cabinet members

The report of the Government on curbing inflation, stabilizing the macro-economy, ensuring social security and sustainable growth has been widely supported of the NA. Nevertheless, many NA deputies, comrades, and compatriots have showed their concerns of how to implement the solutions. This is also an issue of concern among the Government and its members. In socio-economic management, in many cases, there are differences between words and actions, between policies and the implementation of these policies. Without full determination, drastic direction, promptly and consistent action, regular investigations, close supervision, timely solutions to lift up difficulties and challenges, it is impossible to obtain the desired results, in spite of sound targets and good measures. In addition, of the package of measures to rein inflation, some may cause side-effects and easily create confusion. Great efforts made by the whole political system and support of the people are required to successfully curb inflation. Market prices and the world economy will continue to be unpredicted, and there remain many negative effects to the domestic economy. When persisting in solutions to curb inflation, the Government anticipates different situations and is closely supervising the most important macro balances in order to timely discover and deal with the complicated developments. With a high sense of responsible, the Government is focusing on instructing the consistent endorsement of all measures and has gained some initial results in some aspects. The Government places importance on inspecting and grasping the actualities, timely addressing newly arisen problems to fruitfully fulfill the tasks approved by the NA at this session, bringing about positive changes.

NA deputies

High price escalation has made livelihood of the majority of Vietnamese people more difficult, particularly the poor and low-income laborers. Each household and each individual is forced to cut spending and hardly afford their daily life. The Government is fully aware of this and shows its deep sympathy to all people. Acknowledging its responsibility, the Government pledges to spare no effort to drastically rein inflation.

The recent upheavals have helped the Government have a full insight of the complexity of the management of an economy transforming from the centrally-planning subsidy model to the socialist-oriented market one, in the context of globalization and international economic integration. The Government has also recognized its weaknesses and inefficiency; and each Cabinet member has learned new lessons and experience.

The Government recognizes that the most positive and responsible attitude in admitting mistakes is to look straight to the reality as well as to inefficiency and weaknesses, with a determination to eradicate shortcomings, bring into play strong points, and take urgent actions. The NA’s agreement with the Government’s report has consolidated the Government’s confidence and determination to continue its implementation of the set tasks and solutions.

Our people and country have ever faced mountains of challenges and extremely high inflation for years. Thanks to the whole nation’s joint efforts, we have overcome all difficulties, making the country advance, scoring great achievements over the last 20 years.

Nowadays, despite difficulties, our strength and position are greater and the country‘s potentialities are huge. Bringing into full play the nation’s good traditions, the strength of whole-people solidarity, the support of people, the assistance and supervision of the NA in the spirit of community responsibility, the Government is convinced that we will successfully realize our targets of curbing inflation, stabilizing the macro-economy, ensuring social security and sustainable growth, paying favorable conditions and good foundation for the sustainable development in the coming years.

Wishes good health for NA deputies, comrades and compatriots,

Thank you.

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[1] Food and foodstuff prices increased by 15.6% in 2004 and the consumption price by 9.5% in comparison with December of the previous year; the figures in 2005 were 10.8% and 8.4% respectively; in 2006: 7.9% and 6.6% respectively. Especially in 2007 and the first five months of 2008, the food and foodstuff prices sharply went up, leading to the high increase of the consumption price. In 2007, the figures were 18.92% and 12.63% respectively; and in the first five months of 2008, 52.88% and 15.96% in comparison with December 2007. So, the food and foodstuff prices have great impacts on CPI.

[2] According to the May price level, if food price increases at the April rate of 6.11%, CPI will be 2.08% and 13.9% in May and in the first five months respectively.

[3] To quickly pull down inflation, it is necessary to reduce the food price through applying high tax on rice export or drastically cutting export volume. However, these solutions will reduce export turnover, increase the trade gap, affect farmers' income and livelihood, discourage rice cultivators, and threaten food security. Similarly, the cut in investment is necessary to reduce inflation. However, the over-cutting will cause unemployment and other complicated problems relating to social security; and the monetary tightening can affect the economy’s liquidity and the performance of banks, leading to avoidable disorder.

[4] At the 2nd NA sitting session, the Government submitted to the NA the plan to issue VND 37 trillion Governmental bonds in 2008.

[5] The Incremental Capital Output Ratio (ICOR) is the ratio of total investment of the whole society to economic growth. ICOR = periodical investment capital/Additional GDP growth. It shows how much investment capital is needed to earn a penny from economic growth, or how many units of investment capital it will need to obtain a GDP growth unit. On that ground, we can calculate the need for investment capital that the society mobilizes to acquire a certain economic growth rate.

[6] The ICOR of the Republic of Korea in the period of 1961-1980 was 3.0; Taiwan: 2.7 (1961-1980), Indonesia: 3.7 (1981-1995); Thailand: 4.1 (1981-1995); Malaysia: 4.6 (1981-1995); China: 4.0 (2001-2006). In the period of 2004-2007, the ICOR of Indonesia: 4.2-4.5; Thailand: 3.9-5.5; and Malaysia: 3.5-4.7.

[7] Excluding four State-run commercial banks, one economic group and four corporations which have finished equitization; the State capital investment corporation operates in its own mechanism and some corporations have not presented their financial reports.

[8] Five loss-making corporations include the Việt Nam Silk Corporation (VISERI), Việt Nam National Salt Corporation (VISALCO), Central Corporation (COSEVCO), Sông Hồng Corporation, and the Việt Nam Waterway Corporation (VINAWACO).

[9] Resolution of the 10th Party Congress.

[10]  Resolution of the 3rd Plenum of the Party Central Committee (Tenure 9).

[1[1]] Particularly, steel (rose up by 106% and was equivalent to the overall import volume in 2007), below-12-seat vehicles (up 12 times), automobile spare parts and motorbikes (2-4 times), and gold (8 times) against the same period last year.

[12] By adopting the world’s average price of crude oil in the last half a month (US $128 per barrel) and maintaining the current domestic selling price, the yearly amount of losses is about VND 40,600 billion. If the average price in the last five days (from May 23-27) at US $132 per barrel, the figure is estimated VND 44,800 billion.

[13] Rice volume to balance the supply (in the last two months of 2007 and the first four months of 2008) was 19.8 million tons. The figure was 14.8 million tons after deducting domestic consumption within six months.

[14] Compared to the last Spring-Winter crop in the Mekong Delta, pesticide costs increase 49.2%, for water pumping 66.3%, fertilizers from 41.7 to 360%, labor cost 31.4%. Peasants in the Mekong Delta earn around VND 2,000-2,500 in profit for each kilogram of rice. 

[15] For example, proposal to prolong the implementation of Program 134 to 2010; prevent re-impoverishment and formulate new poverty line; resettle inhabitants, including free migrants; provide production lands to the Khmer; raise assistance for overcoming natural disasters and epidemics, especially assistance from Central budget; policies for civil servants at the grassroots level, including the employment of communal practitioners; job generation and solutions for unemployment; the use of resources earned from the equitization of hydro-electricity plants to assist local people; pay attention to training ethnic minority people, especially the pre-school level; take care of the livelihood of workers in concentrated industrial parks; back enterprises in training and retraining workers; specific mechanism of poverty reduction for 58 poorest districts.     

[16] The poverty line announced in 2005 is applied in 2006-10. Accordingly, poor households are those with the average monthly income below VND 200,000 per person in rural areas and VND 260,000 in urban areas. 

[17] In 2003, the consumption price increased 3%, in which food and foodstuff rose up 2.8% The figures are 9.5% and 15.6% respectively in 2004; 8.4% and 10.8% in 2005, 6.6% and 7.9% in 2006, 12.63% and 18.92% in 2007; and 15.96% and 26.56% in the first five months of 2008.   

[18] Conclusion 22-KL/TW of the Political Bureau dated on April 4, 2008 on some socio-economic issues in the first quarter of 2008 reads “To adjust the roadmap of raising salary ahead of the schedule to reduce difficulties for civil servants and staff in non-productive administrative sector, soldiers of the armed forces, and workers in enterprises.”