Economist Can Van Luc, a member of the National Financial and Monetary Advisory Council, discussed with The Hanoi Times the significant role of businesses for Vietnam to accelerate business recovery and ensure bright economic prospects.
|Economist Can Van Luc.|
Since the first emergence of Covid-19 in 2020, the Government has launched several relief packages for businesses. But there have been voices calling for additional supports, what is your view in this regard?
So far, the Government has put in place financial support of VND62 trillion (US$2.73 billion) for businesses and people affected by the pandemic, a credit package with a 0% interest rate worth VND16 trillion ($705.3 million), and a fiscal package worth VND250 trillion ($11 billion).
The Ministry of Planning and Investment estimated the combined value of the existing support program is at around 2.84% of the GDP, which shows the huge efforts from the Government amid budget constraints.
But the pandemic impacts, especially the latest fourth Covid-19 outbreak, have taken a heavy toll on the economy, while the efficiency of current programs has left much to be desired due to the low disbursement rate.
To continue supporting businesses to recover during the new normal, the Government should allocate greater resources for them to resume operation and address difficulties during the pandemic. Given the key role of businesses in creating jobs and contributing to social welfare security, the speedy recovery of businesses would have a direct impact on economic recovery.
What should be key changes in upcoming support programs?
Vietnam’s Covid-19 strategy has now been shifted to safe and flexible adaptation to the pandemic situation. Therefore, the Government’s support program should not only be limited to “rescuing” the businesses but also laying the foundation for them to thrive.
In addition, to continue lowering fees, taxes and providing preferential loans for businesses, the Government may take drastic steps in improving the business environment and grasping opportunities from the digital economy, and investing in the infrastructure to boost growth.
How should the Government finance large-scale support programs amid economic difficulties?
The relief package should consider both fiscal and monetary support, in which fiscal policies are expected to play a key part. For the past four years, Vietnam has done a good job in solidifying its fiscal base, so this is the time to raise Government spending. It could also look for savings from cutting operational costs and mobilizing resources through the issuance of Government bonds; accelerating privatization of state-owned enterprises; and borrowing from international organizations such as the ADB or World Bank, those that are providing loans for regional countries such as the Philippines (US$2 billion) or Indonesia ($500 million).
What should the Government focus on to mitigate impacts from a fiscal deficit, bad debts, or inflation during the implementation of new support programs?
The Government should plan in advance the resources to be allocated during the next two years, which for me, would be around 3% of the GDP per year. It is no doubt that there would be higher risks for public debt or fiscal deficit, but the efficient implementation of new programs would outweigh such risks. Otherwise, failure to put those programs into practice would lead to inflation and waste of resources.
Vietnam should set a deadline to complete the recovery, and ideally, this could be around the next two years.
How should these programs be carried out to ensure effectiveness?
There should be different levels of support for each economic sector, as the Covid-19 impacts vary according to the sectors. In this process, it is imperative to give aids to those in difficult situations but have the potentials for recovery in the post-pandemic period. The Government could also use these programs to promote green economy, innovation, or circular economy, which are closely associated with climate change response.
From a business perspective, the biggest concern is how to access Government’s support programs and optimize operational costs. Therefore, every program should have simplified procedures and transparent information.
The Government may also carry out evaluation programs to assess the effectiveness of these supports for timely modification if needed.
Thank you for your time!