VEPR

VietNamNet Bridge – Small and medium-sized private enterprises should receive the most support from the Government’s recently announced US$6 billion stimulus package because they would help address unemployment and support lower-income people.

This was one of the thoughts revealed on Tuesday at a conference of economic experts from the Center for Economic and Policy Research (CEPR) under the Hanoi Economics University.

At the meeting, held in HCM City, experts put forward six scenarios for mobilizing the money, including issuing bonds, corporate income-tax exemption, borrowing loans from foreign countries and using the State's reserve fund.

According to CEPR director Nguyen Duc Thanh, the package could be supported by three main sources, namely issuing Government bonds, tax exemption or the State reserve fund. However, he said each source had shortcomings.

Thanh said bonds were no longer attractive to the public, therefore it would be hard to raise much from this source. And the money gained from tax exemption was not considerable, apart from the difficulty of choosing which enterprises were eligible.

And, he added, the State reserve fund seemed too small to back the stimulus package. If foreign-reserve funds were used, this could lead to the devaluation of the Vietnamese Dong and cause higher inflation.

When discussing which economic sectors could benefit most from the package, Thanh said that as it was meant to fight the economic slowdown, the money should be invested in sectors that had greater impact on the economy, such as food processing, producing consumer goods and producing material for manufacture.

Former director of the Central Institute for Economic Management Le Dang Doanh agreed with Thanh, saying money should not be invested in State-owned enterprises because their efficiency was low.

Doanh said the State-owned sector accounted for 40 per cent of GDP, but created only 6 per cent of jobs, while the private sector created 92 per cent of jobs.

Those who were affected most by the economic downturn were middle class and low-income people, most of whom were working in agricultural and export sectors, excluding the large number of laborers in foreign-invested companies suffering losses.

Therefore, the sector that needed support was that covering private , small- and medium-sized enterprises because they would help address unemployment and support poor people.

Flow-on effect

Thanh said that the package should be focused on two economic areas, the South East and North East as these two regions created a flow-on effect to others.

Priority should be given to export and labor-intensive sectors and industries that created high added value, Deputy Director of Vietnam Economics Institute, Tran Dinh Thien, said.

Doanh said that as Vietnam was integrating into the world economy, the stimulus package must be considered in the world situation.

For example, China used monetary and interest-rate measures to help export firms, thus Vietnam must take protective reactions, otherwise it would be seriously affected.

According to some experts at the conference, administrative reform was also an important part of utilizing the stimulus package.

Dr Pham Chanh Duong said Vietnamese companies’ weak competitiveness was due to high administration costs, therefore, the amount of money gained from streamlining administrative procedures would be considerable.

Thien said if the package was to work, the Government must have a concrete plan and capital distribution must depend on specific principals to avoid misuse.

(Source: Vietnam News)