Waiting for the second "breathing aid" package for the economy: Avoiding the same mistake?

Priority should be given to supporting businesses with many employees. Photo: HoaiAnh

The first "breathing aid" still slow

According to the Ministry of Planning and Investment (MPI), the Covid-19 pandemic is still complex andit is not known when the world economy will resume production, supply chains as well as tourism, transportation and production activities. Vietnam is coping with the pandemic situation in the second stage. Therefore, it is very important to quickly propose solutions and policies for the current period to minimize damage, maintain production at the most reasonable level and take advantage of opportunities to quickly overcome short and low cost economic recovery to restore the economy and help Vietnam develop faster. Determining that there will be many mounting difficulties due to the Covid-19 pandemic on the economy, the Government has decided to continue researching to build a second "breathing aid" package for the economy after the supportive solutions from the first “breathing aid” campaign have not hadreal effects.

During the first Covid-19 outbreak, the Government has had many support packages to energise the economy such as a fiscal support package with measures to stretch, reduce taxes, fees, land use fees with ascale of 180,000 billion VND, money support package VND 250,000 billion and a social security support package of VND 62,000 billion. However, according to the assessment, the effectiveness of support packages over the past time is only moderate. In which, with the package of 62,000 billion VND of social security support, so far, only more than 17,000 billion VND has been disbursed. A survey by the Vietnam Chamber of Commerce and Industry shows only about 3% of enterprises have received support from the policy. With the time from the date of promulgation up to now is nearly fivemonths, this is a very low rate. The cause of this situation is the push andfear of responsibility, causing delay in the provisionof support.

According to Dr. Nguyen DinhCung, former Director of Central Institute for Economic Management, the support package is smaller than the actual damage of businesses and people, but the impact of these packages compared to the scale of support policy accounts for a small proportion. Some businesses do not incur taxes, have no revenue andare inactive, so there is nothing to postpone, delay tax, so it shows that the pandemic has a great impact on businesses. Besides, the package of 62,000 billion VND of social security support has beenimplemented slowly and the achievement rate is very low, so the impact of this package is unlikely to reach the target. Dr. Nguyen DinhCung pointed out the reasons such as there are many citizen management agencies, but in the end, they do not know specific information of the people, so when implementing policies, it takes time to verify, causing difficulties. Additionally, the enforcement team still has an emotionless phenomenon in people's lives. Also, the authority of the Prime Minister is very limited, only to delay or delay the six-month tax and fee service, not the right to exempt, reduce by exemption or reduction under the jurisdiction of the National Assembly, the decision-making of the Government is also slow.

Which object is preferred?

Recently, the Ministry of Labour, War Invalids and Social Affairs proposed a second support package for businesses and workers. The estimated funding source is VND 15,000 billion, focusing on preferential credit policies to develop production and business, restore, maintain and expand jobs and beneficiaries that are small and medium enterprises, cooperatives, cooperative groups andbusiness households, with priority given to micro and small enterprises (less than 10 employees), cooperatives and business households (collectively referred to as production - business establishments) andworkers in rural areas. Along with that is the policy to support unemployed workers in difficult circumstances directly in cash for workers who lose their jobs in difficult circumstances with an estimated cost of 3,600 billion VND.

Dr. Nguyen DinhCung emphasized that in order to build the second economic support package, besides having to reassess the implementation as well as propose extending the first support package, it is necessary to reassess the economy in 2020, the year low income, big spending, big overspending and will exceed the target then it will take into account what if supporting businesses, how they will exempt orreduce. Besides making decisions faster, paying attention to policy implementation, Dr. Cung said this time of support “will certainly not stop at the postponement and extension of obligations, but also to have an exemption or reduction, and this will inevitably cause a large budget deficit. Therefore, there are two ways, one is to calculate how much total support for the economy is and then balance it to make an appropriate level of budget deficit. Second, determine the allowable rate of overspending, thereby giving the level of support. After determining the level of support, it is clear who the specific beneficiaries are, the level of support, how much support is not allowed to be supported. The second way is suitable for Vietnamese conditions,” Dr. Cung noted.

Notably, Dr. Cung said that, in addition to supporting businesses to overcome the pandemic, we have to think that in the danger, we must take the opportunity to recover the economy, offering more comprehensive and larger support packages with a longer term goal, at least 3-4 years.

“The current tourism and hotel industry, if supported, cannot develop immediately, because the demand cannot be reached. Instead, we support by prioritizing and favoring newly emerging industries, professions that benefit or have advantages in Covid-19, prioritizing to support businesses, industries and businesses that are not subject to pandemic diseases but have a future development in the coming time with the message of supporting the winners, potential development, not supporting the losers," said Dr. Cung.

According to Assoc. Professor, Dr. Nguyen KhacQuocBao, Dean of the Faculty of Finance, University of Economics HCM City, because we have to spend a large amount of money compared to the size of thebudget and economy to fight the pandemic, Vietnam’s post-pandemicpolicy will be very different from other countries. Controlling the pandemic will create favourable conditions for Vietnam to restore and reactivate the economy, but it also creates enormous pressures on budget balancing and other fiscal spending duties. Therefore, post-pandemic economic support packages must be built on the principle of ranking order, which are priority subjects, the economic sectors, the businesses that need to be supported first. He also emphasized that it is necessary to lower the conditions for enjoyment for these packages to reach the right and more subjects, and at the same time, it is necessary to give priority to supporting enterprises that use more labour.

Recently, the Ministry of Planning and Investment proposed ministries, branches, localities and units of the Ministry of Planning and Investment have a firm grasp of the operation situation of enterprises to get a panorama of each sector and field, from which to build appropriate mechanisms and policies. "New policies require strong enough, must take special action to save businesses and the economy," the Ministry of Planning and Investment noted.