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Expert calls for review of demand stimulus package
Pham Chi Lan, senior economist, former member of the Prime Ministerial Research Committee, believes that it is now the right time for Vietnam to consider reports about the beneficiaries of the demand stimulus package.
Lan, in the interview given to Thoi bao Kinh te Vietnam, said that in general, the demand stimulus package initiated by the Government has had positive impacts on businesses and the national economy, while having helped the national economy maintain a positive growth rate in the context of the global financial downturn.
However, Lan said that it is also necessary to consider the shortcomings of the packages with the focus on two issues:
Firstly, the demand stimulus package should have brought a better credit growth rate, at some 30 percent as per estimates of experts, instead of 17 percent only.
This means that a certain proportion of credit has not gone to the right addresses to serve production and business, but has returned to banks under the mode of ‘debt turnover’ (clients borrow new debts to pay old debts). The debt turnover has helped make the accounts of banks and businesses ‘cleaner’. However, it is clear that in this case, the demand stimulus package has not obtained the desired effects.
The support capability of the demand stimulus package is also lower than expected, which is reflected in the modest industrial production growth rate of 4.8 percent in the first half of 2009. Meanwhile, exports are still facing great difficulties.
Secondly, the goal of the package is to support small- and medium-size enterprises and export companies. However, it is not clear why Vietnam still has not released any report about the results of the package and beneficiaries, though the package implementation has reached the half-way mark.
TBKTVN: Which demand stimulus measures do you think will fit Vietnam’s economy?
Pham Chi Lan: Every economy has its own development level and its conditions. Some measures could be good for the US economy but may not be effective for Vietnam, because the reasons behind the crisis and the US economy’s scale are quite different from Vietnam’s.
I think that the measures the Government has put forward are suitable for our economy. However, there is one issue that I have thought about, is that in Vietnam, interest rate subsidisation has been carried out through the banking system. Meanwhile, other regional countries which have similar conditions and development levels to Vietnam all give direct support.
TBKTVN: Do you think that the economic downturn in Vietnam has bottomed out and what would you say about the width of the ‘bottom’? Will it be large or narrow?
Pham Chi Lan: In other countries, they have figures about economic growth rate for a certain period and figures about unemployment and consumption level when talking about crisis.
In Vietnam, we have seen the growth rate slowing down, but we have not seen a minus economic growth rate. An official figure about unemployment has not been announced. We only announce figures which are considered essential for the national economy like investment, industrial production and export indexes. These indexes have decreased sharply.
It is really very difficult to conclude if the economic crisis has bottomed out. However, we would be overly optimistic if we said so definitively.
TBKTVN: What is your comment about the way in which we have been trying to escape from crisis?
Pham Chi Lan: In fact, we have groups of measures that aim at both short-term and long-term goals. However, the measures have not been implemented in full.
For example, the group of measures to fight the economic downturn aims to help businesses settle difficulties. However, we have not done much for the goal, while we have just focused on stimulating demand.
I think that helping businesses settle difficulties in production should be the top priority. Businesses not only need direct support form the state but they also need a good business environment to develop in.
VietNamNet, TBKTVN
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