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Reversing economic downturn – a tough task
The global economic recession is having a big impact on the national economy. The government’s urgent solutions, including stimulus packages worth billions of US dollars, have begun to pay off. However, specialists say that the fight against the economic downturn remains tough.
Although Vietnam suffered from the impact later than other developed countries, it has seen a significant fall in its economic growth which only stood at 6.23 percent in 2008 and 3.1 percent in the first quarter of 2009.
Enterprises have also faced numerous difficulties in production and business activity. According to the Vietnam Chamber of Commerce and Industry, last year about 7,000 enterprises were dissolved and more than 3,000 others halted production. On average, the slowdown affected between 30 to 50 percent of the small- and medium-sized enterprises which make up 96 percent of the country’s total number.
There was also a fall in export value, foreign direct investment and overseas remittances, alongside a downward trend on the stock market and the freezing of the property market. Consequently, the number of laid-off workers increased considerably and the quality of life of the majority of the population declined.
After successfully reining in runaway inflation in 2008, the government had to struggle against an economic slowdown as a result of the global economic crunch. It adopted economic stimulus packages totalling VND160,000 billion (nearly US$8 billion) to implement key infrastructure projects, build houses for low-income earners and subsidise interest rates for businesses.
The government has identified its key task for 2009, which is to bring into full play its combined strength to curb economic decline, maintain growth and ensure social welfare.
To realise this task, the government focused on solutions to (1) iron out snags for businesses to boost production and exports, (2) pool resources to stimulate investment and consumption, (3) ensure social welfare and promote poverty reduction, (4) implement ‘active’ and ‘effective’ monetary and financial policies, and (5) boost governance responsive to new developments.
However, economic specialists say that in 2009 Vietnam is expected to face more challenges than in 2008, and the struggle to jumpstart the sluggish economy has just begun.
Specialists have their say
Le Khac Quy, acting president of the rural craft association of small- and medium-sized enterprises, says that banks should publicise loan conditions.
“Although the government adopted several economic stimulus packages, many SMEs in rural areas have not been able to access subsidised loans. We request that banks make public loan conditions and the list of qualified beneficiaries. The association is ready to serve as guarantor for our enterprises to access subsidised loans if they prove their projects are feasible. We also propose that the government establish SME support funds, increase funding for human resources training, and develop the use of information technology and the internet among SMEs.”
Vu Duy Thai, president of Hanoi’s Industrial and Commercial Association, says that the crux of the matter lies in synchronous solutions targeting market.
“Banks should develop more market support services to rev up production and business. We propose reducing corporate income tax on SMEs by 30 percent, starting in the first quarter of 2008. We also propose expanding the scope and scale of those that enjoy a 50 percent VAT imposed on services and material inputs for production, and those that enjoy subsidised interest rates to develop science-technology and high-quality industrial products.”
Professor Bui Tung, from Hawaii University, says that businesses consider customers as their future investors.
“During tough times, businesses must seek ways to cut down on production costs to lower base product prices to increase the competitive edge of their products against Chinese imports. Lowering the prices must go along with ensuring product quality and developing the brand. Businesses should also change their business strategies by selling products of higher quality but in less quantity, and seeking to lure customers, considering them as future investors.
Given the current fierce competition, information is very important to businesses. The fact is that Vietnamese businesses are only provided with general information about the market without in-depth analysis and orientations, and their information processing capacity remains weak. Ministries and sectors should assist businesses in this field.”
Professor Nguyen Dinh Huong, a senior specialist of the Legislation Research Institute under the National Assembly Standing Committee, underlines the need to mobilise and effectively use public investment.
“Mobilising and effectively using public investment is a basic solution for curbing economic slowdown and restructuring the economy during the post-recession period. In Vietnam, capital construction investment, especially public investment, is carried out in a scattered manner, causing losses and waste. So it is necessary to finalise mechanisms and policies to increase the efficiency of public investment. Legal documents on capital construction investment should be examined and revised to ensure the consistency in implementation at all levels. Key national projects should be completed on time, with priority given to the agro-forestry and fisheries sector as well as services.”
VietNamNet, VOV
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