VCN - The Government should urgently have a long-term macroeconomic policy, support packages need to be implemented and adjusted in time because a policy that is implemented late is still a policy without being useful. This is the opinion of Nguyen Bich Lam (photo), former General Director of GSO, on the issue of a second support package to help the economy overcome the pandemic.
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|Dr. Nguyen Bich Lam, former Director General of the General Statistics Office|
In the context of the Covid-19 pandemic having a profound impact on the economy, what support policies should Vietnam have to help businesses and people overcome difficulties caused by production and business stagnation?
- The Covid-19 pandemic will have a great impact on Vietnam's economy, requiring the Government to have a new vision, to have timely and appropriate policies to maintain and develop the economy. Governments of many countries have implemented support packages in two trends – firstly, directly supporting to save businesses, thereby saving workers; while the second is to directly support the rescue of workers, while businesses will follow market mechanisms to decide. European countries approach the first trend. For example, France focuses on saving enterprises to avoid bankruptcy, thereby saving the workforce. The French government offers a financial package to support businesses of up to 345 billion euro (equivalent to US$ 380 billion), equal to 15% of France's GDP through the form of funding or preferential loans. Meanwhile, the US adopts the second trend.
Vietnam has also launched support packages including a monetary policy package worth VND250 trillion, a social security package worth VND62 trillion, a fiscal policy package worth VND180 trillion, focusing on supporting businesses and some employees. We have been very successful in preventing, combating and repelling the Covid-19 pandemic, but the implementation of support packages remains modest. As of July 13, 2020, the new disbursement of the support package to ensure social security reached 18.2%, much lower than expected. Also, the tax authority received about 113,800 requests for tax and land rental extension of enterprises, accounting for 15% of the total number of active enterprises in the economy; received 49,300 applications for the extension of production and business households, accounting for 0.98% of the total number of production and business households in the country. The amount of tax and land rent to be extended is VND47.56 trillion, equal to 26.4% of the fiscal policy package. In the future, the Government, ministries, branches and localities should urgently review and amend a number of inappropriate regulations, add more subjects so that the Government's support packages are timely and clear; it must be realistic.
What are your views on the second support package for the economy? What are the goals of building this support package, sir?
- The International Monetary Fund (IMF) and the World Bank (WB) continuously lowered their forecast for global economic growth after the second Covid-19 wave appeared in many major economies such as the US, Europe, India, Brazil.
In June and July 2020 there were serious impacts on all aspects of socio-economic life, creating a negative shock for both supply and demand sides. Vietnam's economy has a large openness, a domestic consumption market with over 96 million people, but nowadays many major trading partners of Vietnam are still in a blockade stage, so our country's economic growth next year will basically rely on domestic resources to boost investment and stimulate consumption; at the same time, flexibly promote international trade.
In order for the economy to maintain stability and high growth in the post-Covid-19 period, the Government needs to have the next support package (the second package) through appropriate policies with a sufficient scale of large impact, medium and long-term execution time to meet four goals. Specifically, ensuring socio-economic stability, creating conditions for the economy to recover rapidly in the post-Covid-19 period; supporting economic activities, especially the business sector to prevent and minimize liquidity loss, bankruptcy, and dissolution of enterprises, and create conditions for the business sector to quickly recover when the impact of Covid-19 declines; carry out economic restructuring in accordance with post-pandemic world changes; to stimulate domestic consumption and ensure social security.
The Vietnamese business sector contributes over 60% of the GDP of the economy with over 756,000 active enterprises, of which small and medium enterprises (SMEs) account for over 96% of the total number of enterprises in the country. According to survey data, the SME sector had a weak liquidity position even before the pandemic; the debt repayment capacity of the business sector is relatively weak with a high potential risk of default, while the banking sector is facing a relatively large risk of debt. With the impact of the pandemic, it will reduce the profitability of the business sector, create serious liquidity pressure, and weaken the ability to repay the debts of the business sector, increasing the risk of default. With the importance in the economy and the characteristics of the business sector, the second support package needs to focus especially on the business sector, while at the same time supporting businesses to maintain production and restructure the economy.
What are your suggestions for the business sector to effectively receive the second support package?
- In my opinion, in the short term, it is necessary to review the conditions for enterprises to access credit support packages. In fact, in recent years, with the support package worth VND250 trillion, but with support conditions that are not appropriate, complicated, unfeasible and not close to the reality of the business sector, only about 20% of businesses meet the requirements of this support package. In addition, it is necessary to continue to extend the payment of corporate income tax, land rental for businesses, at the same time, and consider cutting electricity prices for the business sector, business households to reduce costs and short-term financial pressure of business and production households. Along with that, it is necessary to promulgate and implement a number of specific policies to promptly remove difficulties for businesses in some important sectors of the economy; have solutions to support capital for SMEs through the SME Development Fund to create conditions for SMEs to access the necessary financial resources to overcome difficulties and restore production.
In the economic, political and social context in the world with many profound changes and differences caused by the Covid-19 pandemic, with the fact that our country's economy is large, the Government urgently needs to have a great policy, support packages need to be implemented and adjusted in time.
By Thu Hien/Bui Diep