Second support package needs to actually benefit businesses: experts

By Quynh Trang   October 18, 2020 | 07:23 pm PT
Second support package needs to actually benefit businesses: experts
A cyclo driver is seen in front of a closed restaurant in downtown Hanoi in March, 2020. Photo by VnExpress/Giang Huy.
The government’s first support package has failed to revive the economy due to poor implementation and authorities should make the second one more practical and accessible, experts warn.

A survey by the National Economics University in September and October of 450 businesses found that 80 percent of them did not benefit from the first package rolled out during the Covid-19 pandemic.

Passed in April, it was worth VND62 trillion ($2.6 billion) and targeted poor people and businesses affected by the outbreak. The government also approved several low-interest credit packages for companies.

But experts said the lack of clear guidelines on how to access them and tortuous administrative procedures acted as roadblocks for businesses.

Economist Vo Tri Thanh said implementing policies is more important than making good ones, and therefore authorities need to oversee the implementation process so that support is provided speedily to businesses.

Tax breaks decision had to go through the National Assembly while it should have been done by the government for quicker implementation, he said.

The second support package should have been issued in September but has not been done until now, he said.

Thanh and other economists said the new package should be big and last at least until next year even if it causes budget deficits so that small and medium businesses and 29 million informal sector workers benefit.

Can Van Luc, chief economist at state-owned lender BIDV, said the first support packages were estimated at 3 percent of GDP compared to 15 percent in developed countries, 10-12 percent in emerging economies and 2-7 percent in Southeast Asia.

He proposed a second package of 2.5 percent of GDP to go along with the continued implementation of the first one.

He estimated that if each informal worker receives VND1 million ($43) a month for three months, the government would need around VND86 trillion ($3.7 billion).

In the case of value-added tax (VAT), which is 10 percent, he said a reduction would cause a major shortfall in revenue collection, estimating that a 1 percentage point reduction for all businesses would cost the government VND38 trillion ($1.6 billion).

He wanted the government to subsidize bank lending to lower interests.

Some experts pointed out the support should be earmarked for companies with potential to recover, and they must be told to keep payroll cuts to a minimum and restructure their business.

GDP growth in the first nine months fell to a decade-low of 2.12 percent. The government targets 2.5-3 percent growth for the full year.

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