MPI mulls second stimulus package

Amid the severe impacts of the Covid-19 pandemic, the Ministry of Planning and Investment (MPI) is garthering public opinon on its proposal of a second stimulus package.

Workers at Thang Long Metal Wares Company. Photo: Pham Hung.

This time, the focus of the government support would be for enterprises with high spillover effects to the economy, especially in fields of aviation, tourism and consumer products.

In addition to a proposal of a government-guaranteed loan package of VND11 trillion (US$414.17 million) for airlines, the MPI is considering a 70% cut in environmental protection tax for jet fuel in 2021 and lowering the escrow money for travel agencies by 80% for two years.

The government has 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).

However, a study from the Central Institute for Economic Management (CIEM) suggested the result of the first package left much to be desired. Specifically, in a VND62 trillion financial support, only VND400 billion (US$17.2 million) was disbursed for enterprises and VND2.5 trillion (US$107.8) million for people affected by the pandemic.

Meanwhile, the majority of the VND180 trillion fiscal package remains undisbursed, as the administrative procedures are complicated and only valid for a short period of time.

A survey from the National Economics University conducted from mid-September to mid-October on six economic sectors hardest-hit by the pandemic (tourism and hospitality; finance, insurance and banking; logistics; textile; IT; and real estate) revealed that up to 40% of enterprises were forced to scale back or even suspend operation, and only 20% received support from government’s supporting programs.

Under the survey, enterprises pointed to two reasons for such a low proportion of enterprises accessing stimulus package, including the inability to qualify for the support requirements, or 55% of the total, 26.2% for lacking of information about the package.

Notably, 14% of respondents blamed for complicated procedures and lack of transparency.

Economist Can Van Luc said the economy is in need of a second stimulus package worth VND150 trillion (US$6.47 billion), or 2.5% of the GDP, while continuing to push for the first package with 75% of the amount undisbursed.

The MPI is currently seeking feedback from ministries and government agencies for the new program.

Vice Chairman of Vietnam Leather, Footwear and Handbag Association (Lefaso) Phan Thi Thanh Xuan said as Vietnam’s major export markets, including the US and EU, are struggling with Covid-19 impacts, developing business in the domestic market is seen as a necessary situational solution for local firms.

Ms. Xuan suggested the government to continue extending support programs such as removing and delaying taxes payment, as well as simpliying administrative procedures for enterprises to access credit packages, among others.

"This is particularly important as the number of enterprises halting operation in the January-October period has surged 58.7% year-on-year to 41,783," Xuan said.

Given the fact that the Covid-19 situation remains serious globally and a higher level of the Vietnam's economic openness, insiders have said that the government needs to have a long-term macro strategy for economic recovery. The support packages should be carried out at the right time to avoid severe consequences for the business community.