Second stimulus package needs to focus on most affected sectors

As the government is planning for a second stimulus package for enterprises and people affected by the Covid-19 pandemic, a selective approach is required to ensure such support go directly to those in key economic sectors and high potential for development.

The statement was released by Nguyen Hong Son, deputy head of the Party Central Committee’s Economic Commission, at a workshop held to discuss the Covid-19 economic impacts and government responses on December 3.

Overview of the workshop. Photo: Ngoc Thuy.

“Covid-19 is a public health crisis which later creates severe consequences to the economy. A mass support in this case would not be feasible, given the limited resources at disposal,” Mr. Son said.

The government has so far rolled out the first stimulus package consisting of a credit aid package worth VND300 trillion (US$12.87 billion), including a VND180-trillion (US$7.63 billion) fiscal stimulus package in forms of the payment delay of value-added tax and corporate income tax, and a financial support package for vulnerable people worth VND62 trillion (US$2.7 billion).

While Vietnam continues to pursue the dual target of both containing the pandemic and boosting economic recovery, the utmost priority remains the effective control of Covid-19, he added.

“A positive economic growth for this year would not happen without successful Covid-19 fight,” Mr. Son stated.

Echoing Mr. Son’s view, Former Director of the Central Institute for Economic Management (CIEM) Le Xuan Ba said it is vital to support enterprises with high growth prospect in the post-Covid-19 era, not the struggling businesses even since the time before the pandemic.

“This could lead to subsequent debt burden, while the goal should be to lay a solid foundation for strong economic rebound in the post-Covid-19 period,” he suggested.

Mr. Ba, however, noted government’s support at the moment, including both fiscal and financial means, are only for short-term.

“What they need most is a favorable business environment for development, for which more reforms are required to ensure greater transparency and fairness among different economic sectors,” Mr. Ba asserted.

As many experts shared their views that the pandemic would accelerate the digital transformation in Vietnam, Mr. Ba warned pressure to digital transformation could be faded or even disappear when the country puts the pandemic under control.

“A long-term support should also consist of measures to boost digital technology businesses,” he stated. 

Tailor-made support

Le Xuan Sang, deputy director of the Vietnam Economic Institute (VEI), referred to a recent survey conducted by the VEI from late September to early November that only 22% of local enterprises get access to existing supporting programs. 

According to Mr. Sang, major issues that led to such a low rate include complicated administrative procedures to apply for fiscal or credit aid packages; lack of specialized support for different groups of enterprises; and short period of support, among others.

Mr. Sang said as the stimulus package is not a “magic wand” that can save all businesses hit by the pandemic, “only a number of enterprises can be saved according to the reasonable economic and practical criteria, ensuring transparency, fairness and high enforcement. “

"The coverage and amount of finance of the rescuing packages should be determined depending on the volume of benefits and losses of the industry caused by the pandemic. 

For large domestic enterprises, Mr. Sang suggested that they will receive an amount of financial support, that depends on the function or level of their social activities, the severity in doing business, potentials and level of economic influence, especially the number of employees.

“Efforts to achieve the dual goal during the pandemic can hardly be effective without flexible and effective legal provisions as those applicable to "wartime",” he noted.