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|Immediate bailout boost to lift long-term recovery, illustration photo|
The Ministry of Planning and Investment (MPI) has proposed an economic recovery programme, including a bailout, which will likely be discussed by the National Assembly (NA) later this month.
Nguyen Duc Kien, head of the Prime Minister’s Economic Advisory Group, said, “The size of the bailout has yet to be fixed, but it will surely be higher than the annual public investment amount. The bailout will not only be disbursed in 2022, but also has a schedule of implementation.”
According to the MPI, public investment disbursement last year hit more than $20.25 billion, while the total state budget for mid-term public investment in 2021-2025 is planned at $125 billion, equivalent to $25 billion per year. Thus, the bailout that the government proposed and the NA is considering will be higher.
Kien said that if the $35 billion value comes to fruition, the bailout will play a premier role in public investment projects to boost economic growth and create many jobs.
“Expending an amount of the state budget could mobilise 4- or 5-fold amount of other investment to pour into the economy. Therefore, the economy will see inflows of about $174 billion in the next 4-5 years. Every year, we have a huge investment at $43.5 billion every year, lower than $56.5 billion in state budget revenue,” said Kien.
The economic recovery programme could consist of four sub-programmes: opening the economy in association with the prevention and management of the pandemic; social welfare and employment; resuming activities of enterprises, cooperatives, and business households; and developing infrastructure while unlocking private resources for development investment.
Nguyen Dinh Cung, former director-general of the MPI’s Central Institute for Economic Management, said that the recovery programme should take place over several years, instead of a few months.
“This would help recover economic growth and significantly contribute to GDP growth to reach the mid-term goal set forth through stabilising livelihoods and resuming business activities,” said Cung.
He added that the programme should concentrate on the south and accelerate infrastructural projects to facilitate manufacturing activities, goods circulation, and export and import. “We should consider the transfer of public-private partnership projects to public investment ones, and invest in digital infrastructure,” urged the economist.
“In order to strengthen private investment, we should exempt corporate income tax for a couple of years even if businesses gain profit. This exempted amount will be poured into manufacturing lines, extending scale, and more projects,” Cung explained. “In order to accelerate consumption, we should also delay VAT payment in 2022 for industries such as tourism, catering, and entertainment.”
The government and the National Assembly Standing Committee have already provided numerous bailouts and assistance to people and businesses during the pandemic – however, the scale has not been very large, at only $6.08 billion in 2021.
They focused on the supply side only and were deemed not strong enough to support many individuals or businesses.
Other countries have been deploying huge bailouts, equivalent to 27.9 per cent of the GDP of the US, 44.8 per cent of Japanese GDP, 15.6 per cent of Thai GDP, 8.8 per cent of Malaysian GDP, and 6.1 per cent of Chinese GDP, among others.
In early October in meetings with the business community, NA Chairman Vuong Dinh Hue said that the Party Central Committee agreed to consider new strategies to remove difficulties for enterprises and strengthen the economic recovery.
“We are considering fiscal and monetary policies to provide a bigger bailout to further contribute to economic reconstruction,” said Hue.