Enhancing Effective Policy Enforcement

9:56:06 AM | 12/21/2020

COVID-19 disrupted supply chains, shrank both aggregate supply and aggregate demand, and increased financial risk and brought the world economy into a recession. The corporate bankruptcy wave is seen everywhere around the world, with insolvent companies estimated to rise to 35% between 2019 and 2021. This resulted in rampant unemployment.

Swift and strong response

Immediately when the epidemic broke out in the world, the Government of Vietnam acted quickly and drastically to control the epidemic. Strong epidemic prevention measures were swiftly deployed, such as border closure, social distancing, suspect tracking and isolation.

However, global infections and counter measures against the COVID-19 pandemic severely hurt Vietnam and its business community. Business operations became stagnant. According to data from the General Statistics Office (GSO), although only 15,400 enterprises completed bankruptcy procedures by November 2020, (an increase of 3.1% over the same period in 2019), up to 44,400 enterprises suspended operations (up 59.7% year on year). Thus, on average, more than 5,400 enterprises suspended their business operations or were dissolved.

VCCI President Vu Tien Loc said, in the harsh struggle against the epidemic and natural disasters, despite very tight State budget, the Government of Vietnam introduced many support policies for companies hurt by COVID-19. Right from the outset of the outbreak, the Government issued Directive 11/CT-TTg dated March 4, 2020 on urgent tasks and solutions to remove difficulties for business operations, ensure social security and responding to the COVID-19 pandemic. According to VCCI's study, in order to carry out this directive, central and local agencies quickly issued about 95 documents on measures to deal with hardships faced by enterprises.

To overcome COVID-19 consequences, relatively sufficient and consistent policies were issued, expressed by the introduction of major support packages like VND250-trillion monetary policy, with focus placed on debt restructuring, interest rate exemption and reduction, and credit support package, VND62-trillion social security support policy, and VND180-trillion fiscal policy, with focus on extending tax and land rent payment deadline and VND16 trillion salary support package.

“The introduction of the above policies has promptly heartened the spirit of the Vietnamese business community. A message on real companionship of the Government has been spread to the business community," he affirmed.

The gap from enactment to enforcement

According to Loc, quickly enacted policies demonstrated the great determination and effort of the Government. However, enterprises' access to support policies has not come up to expectations. According to VCCI’s surveys, by October 2020, no business had been able to borrow from the State Bank's VND16 trillion salary package. As of November 27, 2020, only 75 companies borrowed from this package to pay salaries to their 3,851 employees laid off by COVID-19 epidemic. Remarkably, this occurred after the Prime Minister promptly issued Decision 32 amending Decision 15/2020 on policies on supporting people facing difficulties caused by the COVID-19 pandemic.

Besides, by October 2020, the tax and land rent package disbursed less than VND100 trillion, mainly arising from deferred payment (land rent and special consumption tax for domestic cars), which accounted for VND76.1 trillion while tax/fee exemption and reduction made up for only VND10 trillion.

According to the survey data released by the National Economics University in October 2020, up to 80% of respondents did not received the government's support package and a quite high rate (nearly 30%) did not know about these policies. Or, VCCI’s latest survey showed that although they appreciate the usefulness of support programs, only a very low rate of respondents had access to this support program.

Seeing this reality, Mr. Loc said, “Policies should be more realistic, procedures should be simpler, better classification of beneficiaries is needed. It is important to quickly bring good policies into practice."

According to Mr. Dau Anh Tuan, Head of the VCCI Legal Department, to enhance effective enforcement of issued support policies and strengthen the accessibility of enterprises to support policy packages, it is necessary to understand existing shortcomings and obstacles in execution of support packages to make fine adjustments. At the same time, it is necessary to design support methods suitable to enterprises in each industry, each sector and each period of time. Special priority should be given to small and medium-sized enterprises because of their weak resilience.

Epidemic impacts on economic sectors vary greatly. Some industries are heavily affected (e.g. aviation and tourism) while some others are still growing well (e.g. information technology, e-commerce, post and delivery). Therefore, it is possible to extend the life time of support packages for enterprises have more time to refund the deferred payment and to have more resources for restoring business operations. Support policies need to be clear and transparent to ensure that enterprises, business households and employees can access and understand what they are for as well as their conditions and procedures to access them. This will help beneficiaries know how to get right requirements to access support policies. In addition, it is necessary to relax some conditions to expand beneficiaries and simplify procedures and processes to access support packages, especially financial proof procedures.

By Quynh Chi, Vietnam Business Forum