Rural Areas - Main Point for Domestic Consumption Demand Stimulus

VND52 billion for stimulating demand in rural areaMr Tran Dinh Thien, Acting President of Vietnam Institute of Economics believes that designing projects for stimulating and exploiting domestic market is a right movement since we are encountering difficulty in overseas markets, and developing market at large urban areas is in a saturation situation. As such, capacity to approach and stimulate demand at such markets will be much tougher than at rural market.

 

According to experts, with a population of over 60 million people, demand stimulation in the rural market will be much more efficient compared to that in urban area. Demand of this market segment is very huge. Therefore, once consumers are capable of making payment, domestically made products will be consumed well. Economics experts make a comparison like this “with the heat of the current crisis, rural area will be an important region which helps cool the temperature, and reduce the demand stimulus burden.”

 

According to the project being built by the MOIT to submit to the government which is named “Consumption demand stimulus, goods consumption acceleration, domestic market exploitation expansion”, the state will aid enterprises to study domestic market, organize some market fairs according to product groups or region in order to help enterprises draw public attention and customers to local products. The state will also help enterprises to sell products, especially at rural market. The total budget proposed for this package is approximately VND52 billion.

 

It is estimated that the MOIT will cooperate with Vietnamese companies to organize three pilot mobile sales teams to directly sell goods at centres of districts and communes. Main goods to be sold include necessary items which have price and quality suitable for people in rural area. This programme will get implemented in March 2009 and prolong until 2010.

Select an implementation way While making the project to stimulate demand in rural area, the MOIT has collected opinions to find out the optimal solution. Two aiding methods proposed include: assistance via interest rate for farming product consumption, and money directly allocated to farmers.

Mr Thien gives an example on the latter method: China spends US$2.9 billion for farmers to purchase electronic goods. This is a part of the plan to stimulate domestic demand with a target to reach a turnover of US$22 billion from selling household electronic goods in rural area. However, this method fails to encourage citizens to reinvest.

 

The Acting President of Vietnam Institute of Economics says that, “it is necessary to have a strategy to develop rural economy in a broad meaning, not simply agriculture. Given current situation, ties-up in rural market need to be dealt with so that goods can get consumed easily. Now is also the time that favourable conditions are created for the operation of small production sector.”

 

Moreover, market risks are high at this time. Vietnam is usually subject to natural calamities. The mentioned above method cannot yield high results. “The state needs to have more drastic policies, even relief packages to recover this area,” analyses Mr Thien.

 

As such, the method to support via interest rate for farming product consumption is receiving more support from experts. Agricultural products of Vietnam are having their consumption run into difficulty in both domestic and overseas markets. It is, therefore, an urgent task to stimulate demand for farming products.

“Support via interest rate for farming product consumption is also a way to help farmers have more income without giving them money directly, let alone the fact that almost all “victims” influenced by market risks and natural calamities live in rural area. The state also needs to have timely relief packages for them,” adds Mr Thien.

 

Experts propose that “In fact, the consumption demand stimulus package pushes consumption of Vietnamese goods in local market. The local market should now be given favourable treatment as export used to be.”