Special mechanism needed for economic recovery in HCM City after Covid-19 pandemic

HCM City's economic recovery speed depends largely on the speed and scale of support from the Government and HCM City. Photo: ST

On September 6, a research team led by the University of Economics and Law (UEL) - Vietnam National University in HCM City officially announced the results of the study "Creating the driving force for economic recovery in HCM City during the fourth Covid-19 outbreak " which includes economic recovery policies in HCM City when the distance is over.

The study was conducted based on two assumptions:

Firstly, HCM City and neighboring provinces which have basically controlled the fourth Covid-19 outbreak in September 2021 can bounce back to “new normal" conditions in October.

Secondly, the vaccine will continue to be deployed on a large scale so that by the beginning of the fourth quarter of 2021, approximately 70% - 80% of people living in HCM City and neighboring provinces will have vaccinated two doses. By December 2021, basically 70%-80% of Vietnamese people will be vaccinated with at least one dose.

Experts from the University of Economics and Law said that without the timely intervention of the state, the unemployment rate in HCM City and the southern region will increase sharply in the coming time. Accordingly, the economic recovery speed of HCM City depends largely on the speed and scale of the support from the Government and HCM City.

Research reports have shown that, to put the support policy into effective immediately, it is necessary to prioritise the speed of support and accept a certain deviation in the beneficiaries. Support packages focus on two directions:

First, directly support aggregate demands by cutting taxes, increasing investment spending, spending on job support and essential consumption needs, and ensuring social security.

Secondly, issue financial support for enterprises to limit closures and bankruptcy, joint hands with enterprises to cut down expenses, implement guarantees and loans services, and to provide low-cost capital flows.

As estimate by experts from VNUHCM-IBT, due to the crucial role and position of HCM City's economy in the southern key economic region as well as in the whole country, resource support from the central budget plays a key role, including both the short-term immediate support and structural support.

The research team also proposes the National Assembly and the Government apply specific mechanisms to create momentum for economic recovery HCM City to optimise the economic recovery process of HCM City as quickly as possible and spread motivation for the growth of the southern economic region and the whole country.

According to the research team, issuing government bonds in the condition government bond interest rates are low and transferring this capital to HCM City for use in the form of loans with interest rate payment are feasible and cost effective solutions. In addition, from the 2022 budget year, the central Government proposes to increase the adjustment rate of the HCM City budget from 18% to 23% and allows the increase of the public debt ceiling of HCM City to be able to issue municipal bonds to mobilise enough resources for investment and development.

In parallel with the policy from the central government, the research team recommends that HCM City need to create a driving force through the job-regeneration support package with a proposal to support 25% of the regional minimum wage for businesses to maintain the employment rate, establish a new stimulus program on the basis of the previous interest rate support program which has been very successful for many years.

In addition, it is necessary to build an online wholesale market, improve the capacity of the health system, focus on the speed of digital transformation and increase sustainability of regional linkages along with immediate support policies for individuals, households and firms that are severely injured during the quarantine period.

Accordingly, the size of HCM City’s support package is about VND 22,300 billion, equivalent to 1.7% of HCM City’s GRDP.

The research team have especially emphasised the uniform between coordinating economic recovery policies with other policies like social security, healthcare, epidemic prevention, vaccination, labour - employment, transportation, education and training, to achieve consistency throughout.

According to the research team, ensuring the consistency of policies is even more important than such emergency assistance policies.