Additional economic relief packages in the pipeline

The resurgence of the SARS-COV-2 virus in late July dealt a blow to production and business, as well as tourism services. According to the Ministry of Planning and Investment (MPI), the disease will continue to be complicated in its nature and it remains unknown when the global economy will completely recover.

Therefore, it is currently very important to propose swift solutions and policies in order to cushion the impact of COVID-19, maintain production, and take advantage of opportunities in an effort to reboot the economy in a rapid manner and at a low cost.

First packages prove unsatisfactory

Following the introduction of the first wave of relief packages several months ago, the Government has been drafting a series of second packages aimed at assisting local businesses amid the current crisis.

During the first COVID-19 outbreak that hit Vietnam earlier this year, the Government endorsed three aid packages worth approximately VND500 trillion, with a specific focus on financial and monetary policies, tax cuts, and social welfare.

Despite this, experts say the disbursement of the three packages has been at a snail’s pace, affecting the recovery plans of local enterprises. Statistics indicate that only VND17 trillion out of the VND62 trillion social welfare relief package has been disbursed so far.

Businesses have welcomed the Government’s VND180 trillion tax cut relief package, but have noted that the package is essentially meaningless as it only applies to businesses that operate at a profit.

Dr. Nguyen Dinh Cung, former director of the Central Institute of Economic Management, a member of the Prime Minister’s Economic Advisory Group, says that although the Government’s policies are appropriate, they are fragmented.

“In fact the number of businesses benefitting from the relief package is limited. For example, only businesses that have still operated profitably are eligible for the tax deferral policy. By contrast it does not help those operating without profit, or even those facing losses,” he explains.

What conditions matter?

According to the expert, although the policies are very good ethically, the conditions necessary to enjoy the policies are impractical, to the point they may even have a negative effect. For example, with regard to firms that have laid off 50% of their workforce or lose 50% of their assets, it will take plenty of time in order to evaluate their status, when they are in dire need of immediate support to recover.

“Our main goal is to help businesses maintain operation, but with such conditions, businesses might try to downsize their workforce to take advantage of the policy,” Dr. Cung notes.

Sharing Dr. Cung’s view, To Hoai Nam, Secretary General and Vice Chairman of the Vietnam Small and Medium-sized Enterprises Association, points out that the Government’s policies are correct, although it is dependent on the ministries to set relevant conditions.

“For example, the State Bank has issued Circular 01, assigning commercial banks to implement business support policies. However, banks are independent legal entities, whose credit ratings and operations are different, so the application of the Circular is also different. Therefore, some banks have followed instructions well while some others have not,” Nam elaborates.

Second wave of relief packages

According to Dr. Cung, in order to build a second wave of economic support packages, the Government should review the implementation of the first round of packages and take into account the year’s major economic indicators.

“This time the Government is expected to offer tax exemptions and this will definitely cause a large budget deficit. There are two ways to do this. Firstly, the Government should calculate the total support amount for the economy, then determine an appropriate level of budget deficit. Secondly, the Government should determine the ratio of budget deficit and then consider the level of support,” Dr. Cung articulates.

Dr. Vo Tri Thanh, a member of the National Advisory Council on Financial - Monetary Policies, suggests the new wave of support packages should benefit all businesses, regardless of their size or status, and they should be quickly issued and drastically implemented.

“The new policy should be introduced quickly, otherwise it does not help,” Dr. Thanh stresses.

Business sector set to be prioritised

Nguyen Bich Lam, former General Director of the General Statistics Office, says the second relief packages should be introduced in a way that ensures socio-economic stability and creates stable conditions for the economy to recover in a rapid manner in the post-COVID-19 period. Indeed, the primary focus should be on State businesses.

“Priority should be given to supporting State-owned businesses that make up more than 60% of the country’s GDP,” Lam says. “Therefore, the State businesses that amount to 756,000 at present should be given special attention to help them maintain production and weather the crisis.”

The veteran statistical expert suggests that authorities should fine-tune conditions for local enterprises to access the credit package. In addition, he says the Government should continue to extend the deadline for corporate income tax and land rent payment, as well as reducing electricity bills for State businesses.