Vietnam - "Giving a kiss of life" would not be enough to rescue businesses

VietNamNet Bridge – Responding to the information about the 25 trillion dong bail package initiated by the Ministry of Finance (MOF), economists and businesses say it is not enough to rescue and that the support would not reach out to the neediest subjects.

>> MOF plans 25 trillion dong package to bail out businesses 

“The suggestions by MOF would be useful to support businesses rather than rescuing them,” commented Tran Du Lich, Member of the National Assembly’s Economics Committee on Dau tu.

MOF suggested exempting or reducing the corporate income tax. This would mean nothing to weak businesses. Even though they are the subjects for the support, they would not receive the support, because they do not make profits, and they would not enjoy the tax exemption or reduction.

However, Lich admitted that the corporate income tax remission, land leasing fee decreases and VAT payment delay would bring new lease of life to the national economy. The support would have positive psychological impacts on many subjects, not only on the targeted businesses.

For example, when businesses have more capital to manage to maintain their production, they would be able to improve their production and make heavier investment. If so, the businesses, which do not receive direct support, would still benefit from the support, because they can reduce the accounts receivable and reduce the inventory volume.

Dang Van Thanh, a former senior official of the Ministry of Finance, now Chair of the Vietnam Accountancy Association, thinks that the solutions put forward by MOF would not bring much positive support to businesses, which have nearly got exhausted.

The proposal on corporate income tax reduction would not help the worst businesses, which do not have to pay tax because they do not make profit. Regarding the proposal to delay the VAT payment deadline, this would not help create more working capital for enterprises, if the demand remains weak and products remain unsalable.

Therefore, Thanh believes that the most important solution for now is to apply necessary measures to help businesses access low cost capital resources, i.e. it’s necessary to slash the lending interest rates, freeze debts and continue providing loans to businesses, so that they can fulfill their business plans and resume half-done projects. It’s also necessary to encourage consumer loans to stimulate the demand.

Businesses all say that the weak market demand is their biggest problem. As their products remain unsalable, they do not get money for re-investment. And in order to stimulate the demand, it would be better to cut down VAT rate instead of simply offering the tax payment delay.

With the tax reduction, products would become cheaper; therefore, they would be better salable and affordable to consumers. If so, businesses would be able to clear their stocks and take back money.

Saigon tiep thi newspaper has quoted Ngo Thi Bau, General Director of Foci, a fashion brand, as saying that “the corporate income tax reduction would not help businesses much, because they cannot make profits and cannot sell products.” Bau also thinks that it would be better to slash VAT to help boost sales. Once businesses have turnover, this would help encourage the production resumption.

Director of Minh Tien Company Nguyen Tri Kien also affirmed that the most worrying problem for manufacturing enterprises is the sharp fall of the purchasing power. Meanwhile, General Director of Viet Thy Fashion Dang Quynh Doan has warned that the weak demand would drive the national economy to both the inflation and stagnation.

Le Quoc Phong, General Director of Binh Dien Company, a fertilizer manufacturer, also thinks that the support would help profitable enterprises, while there has been no solution to rescue the numerous businesses on the verge of bankruptcy.

“The government should understand that the thing most wanted by businesses is the interest rate reduction,” he said.

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