New principles deployed for policy funding

The government has already made strong efforts to boost the domestic business environment, Le Toan

With the National Assembly (NA) urging the government to quicken the implementation of the country’s Programme on Socioeconomic Recovery and Development (PSRD) backed by a monetary and fiscal policy worth $15 billion in a bid to provide more assistance to struggling enterprises and people, Deputy Prime Minister Pham Binh Minh has reported to the NA that the government will do its best to continue carrying out this great mission.

“So far, the government has promulgated six decrees to implement many initiatives on the exemption, reduction, and extension of tax payment, land rental, and lending rate assistance,” Minh said. “The prime minister has also enacted decisions on providing support in the form of housing rental for labourers, providing concessional loans for pupils and students, and privately-owned nursery schools and primary schools.”

The government has also announced an investment capital sum of nearly $6.5 billion to deploy over 100 tasks and projects within the PSRD.

“Mechanisms and policies to implement the PSRD have been almost completed. The government has also submitted to the National Assembly Standing Committee (NASC) a draft list of capital for each project and task, and a scheme for flexible adjustment of the public investment sources for the PSRD and the country’s 2021-2025 middle-term public investment plan,” Minh said.

The $15 billion policy includes $2 billion used for purchasing vaccines and medical equipment. The remaining $13 billion includes two packages, with one worth roughly $5.4 billion and the other valued at $7.6 billion.

The $5.4 billion covers four sums, including an already-implemented 2 per cent reduction of VAT for businesses; $1.67 billion as a credit policy implemented via Vietnam Bank for Social Policies, with about one-third aready disbursed; $260.87 million as an extension of tax payment and reduction of special consumption tax for automobiles and some other types of taxes, to be implemented at year’s end; and $286.95 million as assistance for labourers to hire houses – of which only $87,000 has been disbursed.

Meanwhile, the $7.65 billion involves public investment, including $1.82 billion as lending rate support of 2 per cent for enterprises through commercial banks and Vietnam Bank for Social Policies as of January 1; and the remaining $5.83 billion for infrastructure development, including $4.48 billion for road and highway construction – however, this sum is slow for disbursement due to incomplete procedures.

“So far, more than $956,000 out of the above-mentioned $7.65 billion has been disbursed, laying an important foundation,” said Deputy Prime Minister Le Minh Khai.

DPM Minh stressed that in the coming time, the government will focus on directing ministries and agencies to weather all difficulties to quicken the implementation of the SRDP with high effectiveness.

“For example, in June we will enact four documents. The first is about guiding the implementation of a special mechanism for appointments for bidding packages. The second is about assigning provincial people’s committees to be investors of components of expressways funded by the state,” Minh said.

The third document is about guiding the deployment of the public telecommunications fund to continue implementing the government’s programme for providing the internet and computers for pupils, Minh added, and the fourth is about amending a guiding circular on using the fund for scientific and technological development in enterprises.”

Fresh goals

While a number of international organisations have either kept or reduced their forecasts on the Vietnamese economic growth outlook, at a May meeting of the NASC, NA Chairman Vuong Dinh Hue noted that the economy is strongly bouncing back and the government has made great efforts to reform the domestic business and investment climate, with growing confidence of the business community.

The economy must not grow at 6-6.5 per cent as earlier targeted, but instead must increase by an additional 2-2.5 per cent, meaning 8-8.5 per cent in total for the entire year, Hue said. The additional 2-2.5 per cent would come from the positive impact of the PSRD.

The World Bank two weeks ago forecasted that after growing 2.9 per cent in 2020 and 2.6 per cent last year, Vietnam’s economy will bounce back to 5.8 per cent this year and both 6.5 per cent for 2023 and 2024, thanks to domestic production and exports recovering, especially under the impact of many free trade agreements.

Global analysts FocusEconomics told VIR that industrial activity growth this year is projected to accelerate markedly from 2021’s reading, as pandemic restrictions are removed. It estimates that industrial output will grow 15 per cent in 2022, and 8.5 per cent in 2023.

“This year, the economy should grow at the second-highest rate in the region and notably faster than in 2021. The release of pent-up consumer and capital spending will fuel activity, aided by the external sector and the government’s post-pandemic recovery and development programme,” FocusEconomics said. “Our panellists expect GDP to expand 6.7 per cent in 2022 and 6.9 per cent in 2023.”

According to the Asian Development Bank (ADB), Vietnam’s GDP growth is forecast at 6.5 per cent in 2022 and 6.7 per cent in 2023 - a rebound made possible by Vietnam’s high COVID-19 vaccination coverage, the shift to a more flexible pandemic containment approach, expanding trade, and the SRDP.

“External trade will remain robust this year. The Regional Comprehensive Economic Partnership is expected to accelerate trade and the recovery by forming stable and long-term export markets for Vietnam and creating a legally binding foundation for expanding trade,” said Andrew Jeffries, country director for Vietnam of the ADB.

Merchandise exports are forecast to rise by 8-10 per cent this year, he added. “Imports will rise on increased demand for capital goods and manufacturing inputs, and rebounding domestic consumption. The recovery of tourism and sustained remittances will support a current account surplus, forecast at 1.5 per cent of GDP this year and 2.0 per cent in 2023.” Jeffries said.

He added that the SRDP’s effective implementation will be critical for Vietnam to revive its growth momentum. “The SRDP will speed up public investment, stimulating domestic demand. Improved coordination between the central and local levels of government and restored labour mobility will increase domestic and foreign confidence,” Jeffries said.

Mobilising capital

According to the Ministry of Planning and Investment (MPI), in order to ensure sufficient capital for implementing the $15 billion monetary and fiscal policy, the government will conduct radical savings of expenditure from the state coffers. Additionally, state budget revenues must be increased via solutions including the boosting of tax reforms; fighting against revenue losses, transfer pricing, and tax evasion; and equitisation.

“After implementing these measures, if there is still a lack of capital, we will resort to mobilisation of capital from issuance of government bonds, then from loans under official development assistance and loans from foreign donors and financial institutions,” said an MPI report. “The government has thoroughly calculated the policy’s schemes for mobilising and disbursing capital for each year based on the view of firmly maintaining macroeconomic stability, and ensuring all major balances of the economy. These schemes have met our requirements.”

Nguyen Thi Hong, Governor of the State Bank of Vietnam, said the mobilised capital for implementing the resolution will “largely come from domestic sources via issuance of government bonds under the form of local and foreign currencies. This requires close combination of monetary and fiscal policies in order to successfully mobilise this huge sum of capital.” Notably, it is suggested that budget overspending be increased to $10.43 billion in 2022-2023.