In general, the first stimulus package has been very effectively, and has made an important contribution to helping the national economy sprint out of the global crisis. Recently, the government has now decided to continue taking measures to stimulate the economy until 2010.

The first stimulus package has paid off

Associate Professor Nguyen Thi Mui from the Vietnam Bank for Industry and Trade said that the first stimulus package has proved effective in maintaining production and business activities, generating jobs, ensuring social welfare and upgrading the country’s infrastructure to help keep the economy purring along.

Cao Sy Kiem, a member of the National Monetary Policy Consulting Council, and also Chairman of the Vietnam Small and Medium-sized Enterprises Association, said that the first package has helped enterprises, especially SMEs to resolve issues in terms capital sources, reduce the prices of product, and improve the competitive edge of domestic businesses. Tax exemptions has also helped businesses to address the difficulties caused by the economic downturn. Many enterprises that are not eligible to borrow capital, have had an opportunity to get credit guarantee. In general, these measures have helped businesses to secure a foothold in the market.

Victoria Kwakwa, Director of the World Bank in Vietnam said that the first package has been extremely successful in helping the Vietnamese economy maintain its growth and encouraging many enterprises to rev up production with interest rate subsidy. 

However, Mr Kiem said that there remain shortcomings in implementing the first package. For example, many enterprises could not benefit from the package due to the long length of time it took to put the package in motion and also unfair competition for loans among businesses.

Second stimulus package: business restructuring

At the regular monthly meeting in October, the Government decided to continue with the second stimulus package but on a smaller scale than the first one.

Accordingly, providing medium and long-term loans at preferential interest rates for individuals and organisations to develop production, purchase equipment and machinery for agricultural production and buy construction materials for rural areas will be extended to December 31, 2010 (decision 433). However, the interest rate will be cut from 4 percent to 2 percent. The Government also decided to extend the preferential loan rate of 2 percent to the first quarter of 2010 (decision 131).

Nguyen Duc Kien, a member of the National Assembly’s Economic Committee, said that extending the package to the first quarter is to help businesses pay their debts as well as showing the Government’s care for businesses.

Vu Tien Loc, chairman of the Vietnamese Chamber of Commerce and Industry (VCCI) said that most businesses have stood firm during the global economic downturn. Several have planned to restructure themselves and upgrade their technologies. When the global economy is in recovery it will be very demanding for Vietnamese businesses if they retain their current structure because they will have to complete fiercer during the post-crisis period. Therefore, businesses are very happy with the second stimulus package, especially the package to help businesses restructure because they are not strong enough to do this by themselves.

However, how to make the second stimulus package more effectively is an issue of concern. Associate professor Nguyen Thi Mui said that there needs to be a joint effort made by the relevant agencies and State management agencies should strengthen their supervision to help eligible businesses to access capital. Banks and credit organisations must simplify their borrowing procedures while the beneficiaries should take this opportunity to use capital more effectively.

Cao Sy Khiem said that businesses must realise their weak and strong points and current difficulties as well as making full use of the incentives. The State management agencies also need to put the Government’s policies into effect as soon as possible.