For Business Support Policies to Work More Productively

10:31:50 AM | 10/7/2022

Facing COVID-19 pandemic impacts, Vietnam has prompted support mechanisms and policies for post-pandemic business recovery. These policies have enabled the good recovery of domestic production and business and ensured supply for domestic consumption and export. However, not all policies have worked well.

Many support policies

Assessing the performance of the Socioeconomic Recovery and Development Program, which focused on supporting the recovery of enterprises, cooperatives and business households as per Resolution 11/NQ-CP, Dr. Nguyen Truc Le, Rector of the University of Economics - Vietnam National University of Hanoi, said the policy-supported fund disbursement under the Preliminary Program reached VND55.5 trillion (US$2.3 billion), including VND10,073 billion (US$425 million) of preferential loans via the Vietnam Bank for Social Policies (VBSP), VND3,045 billion of housing rental support for nearly 4.54 million workers, VND34,970 billion of reduced value-added tax and environmental tax on jet fuel and gasoline, as of August 26, 2022, and VND7,400 billion of the opportunity cost of support made through tax forbearance to the end of June 2022. In addition, VND52 trillion of taxes and land rents are rescheduled payment terms.

The consistent coordination of the above solutions has generally brought about positive results. The size of support packages has been expanded much more than that in 2020 and is expected to equal 4.05% of the GDP. Moreover, the proposed policies were well designed, having no significant impact on key economic balances, banking credit safety and financial indicators; maintaining macroeconomic stability while sparing room for formulating and launching new solutions in the coming time.

According to the World Bank, Vietnam’s economic recovery has accelerated on the back of resilient manufacturing and a robust rebound in services. The country’s GDP growth is forecast to surge from 2.6% in 2021 to 7.5% in 2022, while inflation is projected to average 3.8% over the year.

In general, policies and solutions have been very active, flexible and timely enough to help maintain macroeconomic stability, curb inflation, rein in exchange rates, reasonable interest rates and stable fundamentals as compared with other major countries in the world and in the region that are suffering from volatility, thus increasingly enabling business recovery and development tendencies.

Businesses find it difficult to access support programs

According to many experts, policies are good in theory but conditions are too difficult and inadequate in practice. “Large enterprises easily access support policies through official documents, while small ones only learn such information via informal channels. In addition, beneficiaries find it hard to meet administrative requirements and the time for support packages is short, only 3 - 6 months. The scope of support is limited to several industries while many struggling industries have not been supported in a timely manner, including tourism businesses,” Mr. Le said.

Moreover, guiding documents are not timely enough. For example, regarding the land rent extension policy, over VND3 trillion of land rents and water surface rents are expected to be extended payment terms. Nevertheless, no specific guidance document has been released since it was introduced eight months ago.

Dr. Nguyen Truc Le said that the Economic Recovery and Development Program has really stimulated economic development and built the confidence of businesses and people. The program is expected to contribute 1.5-2% of GDP growth in 2022, estimated at 7.5%. To do so, support packages are necessarily synthesized and carefully evaluated, he said.

Accordingly, to promote support packages, authorities need to listen more to the business community and have a timely monitoring and assessment system, with specific implementation instructions for localities. Besides, it is necessary to review and adjust criteria and add new criteria when the world economy faces more challenges. The support needs to be targeted, with priority given to underlying industries in the economy such as logistics and supporting industries.

In the long term, Dr. Nguyen Truc Le suggested that the tax should be further reduced and the tax extension policy should be extended. Policies must be built on the principle of targeted intervention rather than mass intervention. Policies need to be clearly given a flexible application period, that is, to have specific roadmaps.

In addition, it is necessary to further reduce environmental duty and consider slashing more VAT and excise tax. The Ministry of Finance and the Finance - Budget Committee need to separate these matters.

Many companies are uninterested in the 2% interest rate support policy as they find many conditions and procedures very hard to meet and don’t want to be inspected. Furthermore, no collaterals or operation licenses for cooperatives are obstacles to the support package. Moreover, although commercial banks have been allowed to relax their credit room, it seems to be not as much as expected. Hence, the State Bank of Vietnam should consider adjusting the credit room.

To further facilitate business recovery in 2022 and in 2023, it is necessary to launch a number of major solutions like completing the regulatory framework for business investment; continuing to have cost reduction solutions for businesses and enhancing access to government-backed support packages; facilitating access to preferential loans to make business recovery support policies really effective, said Mr. Bui Trung Nghia, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI).

Besides, it is necessary to have timely support solutions for industries that are recovering strongly such as tourism, services, export manufacturing and industrial and export processing zones; he said, adding the need to build and complete the legal framework to facilitate the formation and development of innovative business models, he added.

In particular, it is important to step up the business environment and competitiveness improvement program, with a focus on reforming administrative procedures and business conditions and cutting costs for businesses; have a specific and practical action plan to enhance the ability to take advantage of FTA tariff preferences; and further improve enforcement effect of the government apparatus at all levels.

Mr. Nghia said, among the above solutions, further speeding up the program on the business environment and national competitiveness improvement, with a focus on reforming administrative procedures and business conditions and cutting costs for businesses is one of the most practical and important solutions to effectively support the business community, along with the support policies for beneficiaries, in order to reduce difficulties, provide favorable conditions and create confidence and motivation for the business community in the course of business recovery and sustainable development. This is also the most basic, long-term and cost-effective solution, as well as a political task that the government assigned central and local authorities. From 2014 to the present, the government has annually introduced a series of Resolutions 19 and 02.

This solution is also completely consistent with the Resolution of the 13th National Party Congress that restated that administrative reform is one of the important factors of development institution breakthrough (one of three strategic breakthrough pillars of development), which focuses on reforming administrative procedures and creating a favorable and healthy investment and business climate according to directions of the Prime Minister at the National Conference on Accelerating Administrative Procedure Reform for People and Businesses, which took place on September 15, in order to effectively and substantially conduct administrative procedure reforms, facilitate people and businesses, and transform administrative reforms into a resource and driving force for the country's development.

Mr. Pham Thanh Ha, Deputy Governor of the State Bank of Vietnam

An effective interest rate support program needed

One of the key goals of the banking sector this year is to effectively implement the interest rate support program for businesses and borrowers at commercial banks. Accordingly, we have quickly adopted many measures to improve the legal framework, and coordinated with central bodies to ask the Government to issue Decree 31 and Circular 03 guiding commercial banks to lend to target customers. The SBV has also collected registration information from commercial banks to work with ministries to propose budget allocations of VND40 trillion in two years, with VND16 trillion expected for this year and VND24 trillion for 2023.

After the budget allocation, we guided commercial banks and clearly figured out many issues that need to be addressed in implementation, mainly relating to target customers, methods, ways to make estimates, withdraw capital and provide settlement support. In addition, banks are also required to concentrate all resources to deploy quickly and provide timely support to borrowers.

Although certain results have been achieved, practical deployment still faces many obstacles. Therefore, it is necessary to focus on solving difficulties for beneficiaries of interest rate support. In many cases, customers do not operate in a single industry but in multiple industries and fields, making it difficult to determine the scope of priority and support. At the same time, it is necessary to remove existing problems in evaluation criteria. Time and criteria, evaluation and appraisal methods of lending banks are different from those of inspection and auditing agencies.

To solve these matters, we will deploy interagency groups to conduct surveys on actual implementation in localities and at commercial banks to capture and answer questions and solve problems in practice.

Ms. Ha Thu Thanh, Chairwoman of the Board of Directors of Deloitte Vietnam

There is a need for a mechanism for environmentally friendly businesses

After two years of responding to the COVID-19 pandemic, many businesses had to be temporarily closed or were dissolved largely because of financial difficulties, especially cash flows to maintain regular operations. Companies that are entering the post-pandemic recovery phase find it hard to recruit workers, both in number and in skills. The lack of skills has been a major obstacle to Vietnamese companies, especially those engaged in import and export activities. Besides, competition for skilled and high-quality workers and investment attraction is increasingly fierce. In addition, they also face difficulty in accessing capital and cannot give priority to innovative activities for productivity and competitiveness improvement.

The competitiveness of each business can be improved when being fully shared in connection with industry associations and supported to overcome obstacles, problems and difficulties in a timely manner by authorities at all levels, from local to central. Moreover, the government needs to have a mechanism for businesses that are at the forefront of the environment, with institutions regarding priorities, tax and land incentives for locations of manufacturing plants and the circular economy.

Dr. Lam Van Doan, Vice Chairman of the National Assembly's Social Committee

An institutional framework should be devised to promote decent work

As Vietnam's economy is integrating into the world more and more deeply, the decline in global economic activity, especially the slow recovery of global supply chains, is still affecting the country's socio-economic recovery and development.

Based on recommendations and advice from the International Labor Organization (ILO) for Vietnam in 2022-2026, the legislative work should pay attention to building an institutional framework to promote decent work and reform the system of social security policies by amending such laws as Law on Social Insurance, Law on Health Insurance, Law on Employment and Law on Occupational Safety and Hygiene; researching, reviewing and completing laws on labor proceedings and social protection; caring for and protecting the elderly and people with disabilities.

In addition, it is necessary to solve existing problems and challenges such as high informal employment rate, high rate of untrained workers, and low skill level of workers, and difficult access to basic social services for Vietnamese workers abroad/domestic migrant workers. In particular, there is a need to speed up implementation and improve the performance of three national target programs: sustainable poverty reduction, new rural development and socioeconomic development in ethnic minority and mountainous areas.

Lan Anh (Vietnam Business Forum)