Creating Extra Support after Economic Crisis

 

At the press conference, representatives from ministries agreed that it was now the most important to create an extra support for socioeconomic development after the crisis period. The extra support will ensure the biggest goals, reviving economic growth to 6.5 per cent in 2010 and 7 per cent-8 per cent in 2011.

 

Minister Nguyen Xuan Phuc said cabinet members agreed that the results in the past eight months are very “positive” and stimulus package has proved to be effective.

 

In the first eight months, the uptrend is clearly seen in all realms of industry, agriculture and service. Industrial production in the January-August period expanded over 10 per cent, a strong leverage for the realisation of GDP growth at 5 per cent this year (according to the Ministry of Planning and Investment, the country’s GDP may expand 5.5 per cent in 2009). Many localities reported high growths in industrial production. For instance, Da Nang saw the growth of 17.6 per cent, Ha Noi 16.8 per cent, Thanh Hoa 15.4 per cent and HCM City 11.4 per cent. The stock market is recovering with growing liquidity. The VN - Index, the main gauge of Vietnamese equities, jumped from 235 points in the first quarter to around 500 points at present.

 

Consumer price index (CPI) in August rose 3.47 per cent from December 2008. The total social investment capital continued expanding and reached around 42.5 per cent of GDP. Disbursement of foreign direct investment (FDI) capital totalled US$6.5 billion in the first eight months of 2009.

 

Total retail and service revenues climbed 18.4 per cent in the first eight months of the year. Exports valued at US$37.3 billion and trade deficit was US$5.1 billion, equal to 13.7 per cent of export turnover in the reporting period. The August CPI rose only 0.24 per cent from July and 3.47 per cent from December 2008. The total social investment capital continued expanding and reached around 42.5 per cent of GDP. Disbursement of foreign direct investment (FDI) capital totalled US$6.5 billion in the first eight months of 2009.

 

However, cabinet members asserted that the global economic recession still affects all economies, especially developing and underdeveloped ones. The recovery pace is proven instable and challenging.

 

Domestically, over the past time, industrial production has grown insignificantly as a result of global economic crisis.

 

So far, the stimulus package has made good impacts on the economy. The Government has instructed the State Bank of Vietnam (SBV) to exercise support programmes launched by the Government in the last months of the year.

 

As of August 31, banks lent VND413 trillion soft loans, with 4 per cent interest rate discounted.

 

With flexible and stable regulation of monetary policies in combination with the stimulus package, which discounts 4 per cent of lending interest rate for borrowers, many enterprises have gone out of difficulties to expand business and production activities and they in return contribute to ward off economic slowdown and ensure the social security.

 

The soft loan programme has generated very good effects on the economy. Borrowers are able to cut lending expenses by 30-40 per cent and product prices by 2.5-6 per cent, and create many jobs for labourers.

 

Although interest rate subsidy has not been implemented in other countries before Vietnam, the policy is proven a sound, effective and timely option to cope with negative impacts of global financial and economic crisis. Many specialists and major financial institutions like the WB, the IMF and the ADB are speaking high of Vietnam’s short-term lending programme.

 

Minister Nguyen Xuan Phuc said the Prime Minister ordered to continue exercising tax break, exemption and reduction policies, applying flexible taxation, monetary and credit policies to facilitate businesses to expand operations.

The Government will consider and make the decision on the secondary stimulus package to support the sustainable socioeconomic development in 2010 in the fourth quarter of 2009. The National Advisory Council for Financial and Monetary Policies and several economic experts have proposed the Government to launch the secondary stimulus package. The Prime Minister has assigned the Ministry of Planning and Investment, the Ministry of Finance and the State Bank of Vietnam to study and analyse the rationality and necessity of this stimulus package.

 

In the coming time, the State Bank of Vietnam will continue applying flexible and prudent monetary policies to control the growth of credit and total payment means at 30 per cent and reduce the rate in the following years.

 

The recent retailing price rise in petroleum products was resulted from global rates. Thus, the ministry accepted the request of petroleum traders to adjust the price to ensure profit-making operations of oil traders.

 

The Circular of the Ministry of Finance provides that each rise is not allowed to be more than VND500 per litre but it is only viable in normal conditions. However, the Circular also clearly states that when the stabilisation fund has not put into operation, loss-making traders are still increase more than VND500 per litre.

 

The Petroleum Stabilisation Fund does not take the money from consumers as they will offset losses incurred by traders when the selling price is low and the market price is high. When enterprises make profit, the fund will take a certain proportion of the profit. Clearly, users do not pay a double tax on petroleum.

 

Regarding operating suspension of Dung Quat refinery, the project management board, contractors, PetroVietnam and the Ministry of Industry and Trade have reported to the Government and asked the lead contractor, Technip, to seek causes to overcome the incident. However, the examination result has not been publicised. The Dung Quat refinery is still running on trial basis and the contractors have not transferred the refinery to the operator. Thus, they are entirely responsible for the incident.

The Ministry of Industry and Trade has proposed a policy to allow enterprises to freely export foreign-originated fertilisers. We are waiting for opinions from the Ministry of Agriculture and Rural Development. If this ministry does not object, the Ministry of Industry and Trade will remove export licences for foreign-originated fertilisers.

 

The export licensing imposed on imported fertilisers is resulted from the supply-demand balancing policy, not the intention of the ministry to raise difficulties to exporters. However, the context is different in 2009 and the Ministry of Industry and Trade sees that it is unnecessary to continue with the old process.

 

Currently, the campaign “Vietnamese people use Vietnamese products” is widely carried out. The Ministry of Industry and Trade and other ministries, branches and industry associations are accelerating marketing and introductory activities to bring made-in-Vietnam products to domestic consumers.

Vietnam had licensed some 166 golf courses. After examining, the Ministry of Planning and Investment has proposed the Government to reduce 51 projects and keep 115 projects.

 

However, the Government has not ratified the proposal of the Ministry of Planning and Investment. To ensure agricultural land and urban area, the Government requested the ministry to re-examine 115 golf projects to cut if necessary.