Support to Vietnamese Enterprises during Global Economic Downturn

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Support on taxation in 2009

The Government issued a number of new financial policies, including: allowing SMEs to reduce up to 30% of payable corporate income tax (CIT) in the fourth quarter of 2008 and all of 2009; and extending the deadline for CIT payment in 2009 by nine months for enterprises involved in production, outsourcing, agricultural processing, forestry and fishery products, garments and textiles, leather shoes, electronic components.  These are typically enterprises using a large number of workers and have suffered from the negative impacts of the global economic downturn.

The Prime Minister issued Decision No 58/2009/QD-TTg in mid-April 2009 on additional economic stimulus measures.  This included temporarily reimbursing value-added tax (VAT) payments for exported goods. In addition, the Ministry of Finance gave guidance on procedures for reducing by 50% value-added tax for select items.

In addition, the Government has directed rescheduling import tax payment grace periods; reducing import duty rates for some commodity groups are raw materials and adjusting tax on 08 drug treatment groups to reduce business cost and stabilize the market.

Interest rate support in 2009

The Government has implemented flexible and efficient monetary policies, adjusted flexibility exchange rates by market signals to encourage export and maintain macroeconomic stability, reduce the reserve requirement rate of credit organizations and basic interest rate. The Government alsoand issued an interest rate subsidy policy in 2009 for eligible businesses, including SMEs, intended to ameliorate the impacts of the global economic downturn.

Implementing the direction of the Prime Minister for increasing capital supply in the market, the State Bank of Viet Nam (SBV) decreased by 1% per year the refinancing interest rate and rediscount interest rate.  SBV also required the state-owned commercial banks to lower their interest rates on loans to no more than 10.5% per year.

Prime Minister’s Decision No 131/2009/QD-TTg of January 2009 permitted a 4% interest rate subsidy for organizations and individuals to fund working capital for production and trading activities, with loans of to 8 months in tenor, from 1st February to 31st December of 2009. By December 17,2009, outstanding loans with subsidy interest rate according to the Decision No 131/2009/QD-TTg mention above was about 415.216 billion VND, in which the state own commercial bank and Central People Credit Fund disbursed around 66.6%, join stock commercial bank disbursed 26.2%, foreign commercial bank disbursed 5.1%. Depend on the type of borrower,  enterprises apart from the state own enterprises (limited liability enterprises, join stock enterprises, private enterprises, foreign enterprises…) borrowed about 69.9% of the total loan above.

Shortly after, in order to accelerate the process of economic recovery, regain growth after economic decline, the Prime Minister issued Decision No 443/QD-TTg in early April 2009, in which the 4% per year interest rate subsidy was extended to include medium-long term loans, with a maximum duration of two years.  for organizations and individuals invest in, and develop to production and trading activities…

The interest rate subsidy policy was a right demand stimulus policy of the Government. This policy has received support, efficient collaboration from local authorities, banking system, enterprises sector especially SMEs. IThe interest rate subsidy mechanism was publicized widely, transparently and clearly, having close supervision on commercial banks and subsidiary objects as organization, individuals;and commercial banks implemented it quickly this policy through issuing professional mechanism and providing sufficient information to their customerspromptly.

Up to now, interest rate subsidy mechanism has been smoothly operated by the State bank, commercial banks and localities without negative phenomena. In general, the implementation of interest rate subsidy mechanism which for short-medium-long term loans, loans to purchase machines, components, agricultural and construction materials and loans to policy beneficiaries has initially positive and indispensable impacts for production and trading activities of enterprises, in accordance to the targets set-out as reducing costs of loans and products, maintaining production and trading activities, keeping jobs for workers. The interest rate subsidy mechanism has enable enterprises to sell stocks and increase the return of capital. Many enterprises have looked for new market, set up new business plan and investment.

Credit guarantee support

In order to promote SMEs’ access to financial resources through credit guarantee policy, and in the context of the recent economic downturn, the Government assigned Viet Nam Development Bank (VDB) to perform credit guarantee operations for SMEs across the whole country.

Implementing Decision 14/2009/QD-TTg on the regulation of loan guarantees for SMEs, VDB has signed guarantee contracts with 20 commercial banks and implemented credit guarantee operations since March 2009. According to VDB, by November 2009 the bank had guaranteed a total amount of VND 6,686 billion, across 149 projects and 871 short-term business plans.

VDB (Vietnam Development Bank) has promoted administrative reforms, and thereby reduced the appraisal time for enterprises applying for loans.

Support for jobless workers

To support enterprises that have encountered difficulties caused by the global economic downturn and have not been able to pay salaries, social insurance, or unemployment subsidy, the Prime Minister issued Decision 30/2009/QD-TTg in February 2009, to support workers who have lost their jobs.  In addition, a loan programme for students, and loans in support of labor export have continued.

People’s Committees of provinces and cities have set out various measures to promote production and attract workers in the area, as well as giving guidance to enterprises on ways to stabilize jobs, and raise income for employees.

In Ho Chi Minh City, the Labor Union has directed its district’s branches and unions located in export processing and industrial zones to organize meetings with enterprises who have need to recruit employees to timely support for jobless workers, regularly monitored employment situation to and help introduce suitable workers. By the end of April 2009, 20,612 out of 25,608 workers were given advice on new job prospects. The People’s Committee of Kien Giang province also assisted 50 enterprises that had encountered difficulties in production and business activities, as a result of the economic downturn, to make revised employment plans.

In fact, that many enterprises are having difficulties as debts of wages, social insurance, subsidy grant for workers have lost their jobs voluntarily. However, these debts came in 2008, while the objects of loans under provisions of the Decision 30/2009/QD-TTg must be enterprises having difficulties in 2009, so this problem has not been solved yet.

Other support measures

In the recent past, the Government has instructed ministries and provinces to implement key measures aimed at promoting production, business and exports.  These include:

  • Continue to carry out programmes and projects in accordance with Resolution 24/2008/NQ-CP, dated 28 October 2008, containing an action plan on agriculture, farmers and rural development.
  • Implement measures aimed at supporting the consumption of industrial products, including steel, cement, fertilizer, paper, chemicals, sugar, etc.
  • Develop a national technology renovation programme, and a national programme to promote productivity and product quality, with a view to enhancing the competitiveness of Vietnamese enterprises in 2009-2020 period.
  • Develop a master plan on export promotion and import controls in the -2010 period, and setting up a mechanism to encourage domestic production to replace imported goods.
  • Instruct Vietnamese representative offices overseas to find new markets for Vietnamese goods. Promote the signing of free trade area (FTA) agreements.  Implement regional cooperation initiatives, and conclude signing a Viet Nam – Japan economic partnership Agreement (VJEPA).  And complete initial procedures on special observer status in TPP agreement negotiation.

(Data Souce: SME White Paper 2009)

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