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Second stimulus package is needed
According to economic experts, it is essential to introduce a second stimulus package, with even lower interest rates targeting a smaller number of beneficiaries.
At a recent meeting of the National Monetary Advisory Council, many economic experts said the second stimulus package should be implemented as soon as the interest rate subsidy package is finalized at the end of this year. According to them, businesses have just got out of “emergency” but are still in “hospital”.
Judging from real production and market activities, growth rates are not yet stable and sustainable. Consequently, businesses still need the Government to extend the stimulus package with a focus on developing a number of key sectors by providing them with additional long-term loans.
The General Director of Xuan Kien Automobile Company (Vinaxuki), Bui Ngoc Huyen, said his company is keen to develop locally-made automobile products and expects to introduce four passenger car models, 20 truck models and several bus models in 2012 with a total revenue estimated at VND5,000 billion. However, the company is finding it difficult to locate loans.
Huyen explained that the automobile industry needs a large capitalization and around 5-10 years to get a return on capital while the longest lending periods allowed by banks and by the interest rate subsidy package are five years and two years, respectively. For that reason, his company is having difficulty finding capital to import equipment and technology.
Echoing this view, the Director of a joint stock leather shoe company in Hanoi, Pham Hong Viet, said that even though the global economic downturn is showing signs of bottoming out and a number of businesses have survived, the State should consider giving more help to key sectors, generating jobs and extending the interest rate subsidy package until June 30, 2010.
Regarding tax policy, the President of the Executive Board and Director of the Vietnam Boiler Joint Stock Company, Tran Phuong Hung said that the policies aimed at reducing imported products that can be locally made are still unclear. This has driven major businesses, particularly raw material producers into difficulty.
Hung cited an example: “Four years ago, we asked the General Tax Department to increase import tax rates on locally made boiler equipment to 2 percent and this proposal was adopted. However, we have since then produced a number of products with higher capacity. Therefore, it is essential to increase the import tax rates on equipment with higher capacity to 5 percent under the WTO entry commitment.
Dealing with difficulties encountered by businesses in Hanoi, Nguyen Van Hung, Deputy General Director of the State Bank of Vietnam (SBV)’s Hanoi branch said the rollout of a subsidized lending rate of 4 percent in June and July was slow. Roughly equal amounts of loan capital and armotised capital also gave serious cause for concern.
First, with production and market activities in Hanoi just springing back to life, where can businesses get the money to repay bank loans?
Second, are there any snags in implementing policies that prevent businesses accessing bank loans or make them hesitate?
The Government’s stimulus package has helped many businesses get back on track. However, to bring about reform on a sustainable basis, the Government should adopt specific financial policies encouraging businesses to upgrade their technologies and make them more competitive.
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