Expectations on the driving force of public investment

VCN - Statistics on registration and dissolution show that businesses are still facing very difficult times. Therefore, public investment is still expected to be the driving force leading economic recovery.
Over 136.65 million USD of public investment from foreign sources disbursed in H1 Over 136.65 million USD of public investment from foreign sources disbursed in H1
State Treasury requests solutions to speed up the disbursement of public investment State Treasury requests solutions to speed up the disbursement of public investment
Expectations on the driving force of public investment

The dynamism of the private sector is decreasing

Data on business establishment and closure show that private sector dynamism is decreasing in the first eight months of 2023 as the economy remains difficult.

According to data just announced by the General Statistics Office on August 29, in the first eight months of 2023, the whole country has 103,700 newly registered businesses with a total registered capital of VND 969,600 billion and a total number of registered employees of 668,800, an increase of 2.3% in the number of enterprises, a decrease of 14.7% in registered capital and a decrease of 3.9% in the number of employees compared to the same period last year.

If including the VND 1,273,600 billion of additional registered capital of 32,300 businesses increasing capital, the total registered capital added to the economy in the past 8 months is VND 2,243,200 billion, down 38.3% compared to the same period last year.

In addition, 45,700 businesses are returning to operation (down 5% compared to the same period in 2022), bringing the total number of newly established businesses and businesses returning to operation in 8 months of 2023 to 149,400 businesses; industry, down 0.03% over the same period last year. On average, each month, there are 18,700 new businesses established and returned to operation.

In the first 8 months of 2023, there were 71,800 businesses temporarily suspending business, an increase of 20.5% over the same period last year; 41,100 businesses stopped operating waiting for dissolution procedures, an increase of 26.7%; 11,800 businesses completed dissolution procedures, down 4.2%. On average, 15,600 businesses withdraw from the market each month.

These figures also partly demonstrate the comments of Deputy Minister of Planning and Investment Tran Quoc Phuong at the recent Vietnam Financial Advisor Summit 2023. The Deputy Minister said that what is worrying is that production and business activities in many fields are facing difficulties; the resilience of businesses has been eroded after the COVID-19 pandemic, and some businesses had to narrow production scale and cut output.

Today's major challenges are the market, cash flow and administrative procedures in solving business problems. Capital costs are still high; accessing credit capital, issuing corporate bonds, and offering securities are still difficult.

"Even many businesses and investors are forced to transfer shares, assets, and investment projects in an unfavourable merger and acquisition (M&A) market or do not want to borrow due to production. - Business stagnation, no profit. Maintaining operations and taking advantage of market opportunities face many challenges," Deputy Minister Tran Quoc Phuong said.

Public investment will lead to economic recovery

In that context, public investment is still expected by experts to be the driving force leading Vietnam's economic recovery.

Dr Le Xuan Nghia, Member of the National Monetary Policy Advisory Council, said that the Government has never been as drastic in disbursing public investment capital as it is today. After relieving the "fear of responsibility" factor of localities, it seems that the disbursement of public investment capital is increasingly smooth.

Still, according to data from the General Statistics Office, realized investment capital from the state budget in August 2023 is estimated to reach VND 61,300 billion, an increase of 29.1% over the same period last year. This capital includes centrally managed capital reaching VND 11,400 billion, an increase of 31.7%; locally managed capital is VND 49,900 billion, an increase of 28.5%.

Overall, for the first 8 months of 2023, realized investment capital from the state budget is estimated to reach VND 352,100 billion, equal to 49.4% of the yearly plan and an increase of 23.1% over the same period last year (same period in 2022 equals 47.6% and an increase of 17.1%).

Experts from VPBank Securities Company (VPBankS) said that looking at recent years, the end of the year often has a disbursement speed that is more than twice as high as the beginning of the year, so we can expect the promotion of public investment in the year-end period.

Mr. Tran Hoang Son, Director of Market Strategy at VPBankS Research Analysis Center, said that the driving force for economic growth in the last months of the year will come from public investment. This factor opens up the driving forces of the economy, especially real estate or construction.

The amount of capital disbursed in the remaining 4 months will create outstanding economic demand; public investment is capital to support other industries and fields.

"Therefore, this year, although economic growth did not reach the target as expected by the Government, it was still at 5-5.5%, much better than other economies in the region," the VPBankS expert said.

In the "Review" Report released in mid-August 2023, experts from the World Bank (WB) also said that separating the stage of site clearance and resettlement from investment projects can help speed up implementation progress, especially for large projects.

However, in the long term, the WB believes that Vietnam still needs to improve project planning and appraisal because projects have low input quality and, when implemented, will lead to adjustments, capital overruns, and slow progress. Besides, it is improving the efficiency and effectiveness of public investment management institutions.

By baodautu.vn/Bui Diep

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