Long-term nucleus for fresh assistance

Long-term nucleus for fresh assistance, illustration photo

Perhaps never has the National Assembly (NA) been filled with such strong proposals from lawmakers who requested the government to extend more assistance to struggling enterprises and the unemployed as it did in the second session of the 15th legislature, which wrapped up last week.

The government reported to the NA that following four months of stringent lockdowns and social distancing to combat COVID-19 in so many localities nationwide, the domestic economy’s growth plummeted from 6.61 per cent in the second quarter to -6.17 per cent in the third quarter.

“Tens of thousands of enterprises had to stop operations every month, while tens of millions of labourers have become unemployed. This shows that the economy’s resilience is very weak,” said NA deputy Hoang Van Cuong, representing Hanoi.

In Q3 alone, more than 28.2 million people nationwide over 15 years of age suffered from unemployment and layoffs, with incomes slashed or disappearing altogether. As compared to Q2, the number of labourers with this bad luck increased by another 15.4 million people.

However, in October, Vietnam saw nearly 8,250 newly-established enterprises registered with $4.72 billion and 58,800 new labourers – up 111.2 per cent in the number of enterprises, 73.9 per cent in registered capital, and 17.9 per cent in the number of labourers, as compared to September. Also in October, over 4,300 firms resumed operations nationwide, up 29.8 per cent on-year.

“Since October, business and production activities have been gradually recovering. If this continues in the coming time, we can ensure the growth target for next year,” said Prime Minister Pham Minh Chinh at a government cabinet meeting on the 2021 economic situation thus far.

Longing for support

The NA last week adopted the Socioeconomic Development Plan for 2022, with an expected growth rate of 6-6.5 per cent, and per capita income of $3,900.

One of the key solutions to realise these targets is to further support enterprises and individuals, and increase the disbursement of public investment.

However, NA deputy Dang Bich Ngoc said it is quite necessary to clarify how enterprises and people will access such support in order to recover and develop.

“It is suggested that the NA and the government soon enact a comprehensive programme on socioeconomic recovery and development post-pandemic,” Ngoc said. “There have been some bailouts for enterprises, but they remain insufficient and slow in implementation. Meanwhile, enterprises are in critical need of support, and I think that new bailouts need to be implemented until at least 2024.”

In December, the NA will officially discuss and adopt a comprehensive programme on socioeconomic recovery and development post-pandemic, with an initial estimated value for 2022-2023 of around $34.8 billion. However, this package is believed to be humble as compared to the growing demands of enterprises and people. It is expected to be implemented in the form of reduction and exemption of taxes and fees, as well as preferential lending rates.

The government reported that the total money used for supporting enterprises within 2021 in the form of exemption, reduction, and extension of taxes and fees, and land rental is estimated to be about $5.13 billion. In which, the extended sums are worth $5 billion and the remainder is for exemption and reduction at just 2.5 per cent.

“This exempted and reduced sum is too low, and far lower than the contribution of $382.4 million from enterprises to the national COVID-19 vaccine fund, while enterprises are being tormented with untold losses,” said NA deputy Nguyen Huu Thong, representing the south-central province of Binh Thuan. “It is suggested the government and localities apply bigger support packages for enterprises, and consider the packages an investment into enterprises so that they can recover soon.”

He also proposed that the government soon review all enacted packages since last year as there has been no official report on how these packages have benefited enterprises.

“The new packages must be big enough for businesses to grow and for the economy to reach its growth target,” Thong said.

Minister of Finance Ho Duc Phoc revealed that besides fiscal packages already to support enterprises, his ministry is mulling over another package valued at VND20 trillion ($869.56 million) that will be enacted by the government. Notably, this package will be implemented in the form of lending rate reduction and exemption.

NA deputy Nguyen Nhu So representing the northern province of Bac Ninh also urged the government to soon give the kiss of life to struggling enterprises so that they can soon recover and contribute to growth targets in 2022.

“Many nations worldwide have had to use big bailouts to assist businesses and the pandemic is showing no signal of stopping,” So explained. “The government has set a public debt target for 2022 of 44-45 per cent of GDP, and this rate is expected to be 43.7 per cent in 2021. These levels are quite safe as compared to the permissible limit of 60 per cent. Thus, we still have a lot of room for applying big support packages which can have spillover effects for many economic sectors. However, the packages must be earmarked for appropriate beneficiaries.”

Accelerating public investment

In the Socioeconomic Development Plan for 2022 the NA stated that to ensure economic growth, all efforts must be made to reach the disbursement rate of over 90 per cent in public investment.

PM Chinh said accelerating public investment disbursement has to be one of the most important tasks in the remaining months of this year and in 2022. “All obstructions must be removed immediately. Boosted disbursement must be in line with ensuring work quality, and heads of units must be responsible for their units’ disbursement results.”

NA deputy Bui Xuan Thong representing the southern province of Binh Duong said that constituents want the government to build state-funded works which can help generate employment and consume materials while making it more favourable for transporting goods – meaning more costs will be saved and the domestic investment and business climate will become more attractive to investors.

“However, disbursement has been slow for many years and has yet to be overcome,” Thong said.

The government’s statistics showed that by late October, disbursement of public investment is estimated to reach 55.8 per cent of the yearly plan assigned by the prime minister, lower than that of 67.2 per cent in the corresponding period last year.

“This has had negative impacts on implementing growth goals for 2021 and even 2022, reducing the effectiveness of investment capital, lengthening the time for project implementation, and increasing investment capital,” Thong explained.

According to a study by the Asian Development Bank, on average, delays in implementing a state-funded project will annually lead to a 17.6 per cent increase in costs and an 11.1 per cent loss in the project’s benefit. Moreover, if the project is delayed within 1-2 years, its costs will be raised by 50 per cent due to the fiscal deficit.

According to the Ministry of Planning and Investment, slow disbursement is ascribed to a series of reasons, such as social distancing due to COVID-19; slow allocation of public investment among ministries, central agencies, and localities for 2021; failure in imposing punishments on units failing to boost investment; and slowness in site clearance and resettlement.

For instance, the Long Thanh International Airport project in the southern province of Dong Nai is one of the most important transport projects for local and regional socioeconomic development, promoting tourism, and facilitating trade activities. However, the bigger the project is, the more difficulties developers are facing.

The airport’s site clearance project has had $993.7 million pumped into it. However, accumulated disbursement since 2018 has reached $465.1 million, or 46.81 per cent.

Long Thanh International Airport’s total investment capital is estimated to be $16.06 billion, including $5.45 billion for the first phase running from 2020 to 2025.