The Government’s approval of a VND29 trillion bailout package will not pay off as expected if there are not effective measures to address economic weaknesses in the long run.
Illustrative photo - Source: VOVNews
VND29 trillion is not a big sum to compare with the State budget spending and 2009’s VND150 trillion stimulus package. In order to avoid the mistakes made during the implementation of the 2009 stimulus package, policy makers have more than once affirmed that it is a “bailout”, not a “stimulus” package.
The stimulus package offered three years ago has failed to provide an interest rate subsidy of 4 percent to the needy businesses, as the reduction and deferment of taxes simply “leveled the playing field” for all of them.
In addition, there is no detailed report on the implementation of the package made public so far.
Regarding this year’s bailout package, economist Bui Kien Thanh says the deferment of value added tax (VAT) is not very significant because it can only help businesses use the money as circulating capital, but does not reduce product prices.
The 30-percent reduction in corporate income tax can only help profit-making businesses, which are not in dire need of assistance.
Economist Pham Chi Lan proposes cutting corporate income taxes because the current tax rate of 25 percent is much higher than the average level in Southeast Asia and may affect businesses’ competitive edge.
Meanwhile, Thanh proposes an exemption of VAT, which he thinks can help enterprises reduce their product prices by 10 percent.
It is also necessary to create favourable policies to let businesses use their in-stock products as mortgage.
Lan says the bailout package is crucial for not only stabilizing the macroeconomy but also rescuing businesses.
Macroeconomic stability is aimed at reducing inflation, she says, but with thousands of businesses hitting the wall it is not sustainable enough.
Ha Huy Tuan, Vice Chairman of the National Financial Supervisory Commission, says there remain serious problems to be addressed in the national economy.
He cites what happened in 2008-2009 as a case in point that showed implementation of the stimulus package and policies to restructure businesses was not as effective as expected.
Tuan recommends there would be long- and medium-term policies instead of band-aid measures.