Vietnam’s fiscal policy in the context of the COVID-19 pandemic: flexibility to support the economy
- QTH-3Q-19 Bui Hong Hanh
- Apr 5, 2022
- 7 min read
Updated: Apr 13, 2022
From mid-2020 to now, the outbreak of the COVID-19 pandemic with a very fast spread, unpredictable and unprecedented levels of danger in history has had a strong, comprehensive, and far-reaching impact on all aspects of global economic and social life. Vietnam is also strongly affected when a series of localities have to implement social distancing, including two major economic centers, Hanoi and Ho Chi Minh City. Many economic, cultural, and social activities are affected; production and business have stalled, especially in some fields of industry, services, transport, tourism, and so on. Millions of workers lost their jobs, lacked jobs, and deeply reduced incomes, causing a serious crisis in employment, unemployment, and social security, and affecting the global economic, political and social order.
The difficulties of the COVID-19 crisis have significantly affected Vietnam's economy in the past 2 years. However, thanks to the support from the state, especially through fiscal policy, people's life gradually improved, Vietnam's economy entered 2021, the first phase of the 10-year period of 2021-2030 with expectations of continuing to develop strongly. Looking back on the lessons from the pandemic is essential for the effective implementation of development strategies for 2022 and the years to come, especially the 2021-2030 period. Therefore, VNEDS interviewed two groups: the policy implementation group and the policy beneficiary group. From there, it gives an overview of the policy implementation situation in the localities as well as comments on the problems posed by the fiscal 2022 policy and offers some policy suggestions.
1. A brief overview of Vietnam's fiscal policy 2021
Most international organizations forecast the global economy, major countries, and partners to grow negatively in 2020. However, Vietnam is one of the few countries that continues to maintain positive growth. According to the World Economic Outlook Report released in November 2020, the International Monetary Fund (IMF) concluded that by 2020, Vietnam's economy grew by 2.4% and be one of the four highest economies in the world to achieve GDP growth per capita (along with Taiwan, Egypt and China).
Facing the complicated development of the pandemic, the Government has issued or submitted to the Standing Committee of the National Assembly and the National Assembly to promulgate a series of supporting fiscal policies such as exemption, reduction, tax extension, and land rent to support people and businesses as well as provide livestock capital to solve difficulties in agriculture for people. In addition, ministries and sectors have reviewed to exempt and reduce fees and charges to remove difficulties for those affected by the pandemic. Financial support packages have promptly removed difficulties, reducing the stress of balancing cash flow, costs, and short-term financial pressures for businesses, production households, businesses, and workers.
Table 1: Vietnam's fiscal policy for Covid-19 in 2020
2. The responses/views of all levels of government and local people to the policy
In the face of the complicated development of COVID-19, Vietnam's fiscal policy has been adjusted flexibly to provide timely support to businesses and people heavily affected by the pandemic. Four individuals: Mr. Le Xuan Phung (chairman of Trung Chinh commune, Nong Cong district, Thanh Hoa province), Ms. Dinh Thi Van (branch secretary, head of the front work department of Trung Chinh commune, Nong Cong district, Thanh Hoa province), Ms. Ta Thi Xuyen (resident of Trung Chinh commune, Nong Cong district, Thanh Hoa province), and Ms. Do Thi Hong Gam (resident of Trung Chinh commune, Nong Cong district, Thanh Hoa province) answered VNEDS reporters about these issues:
2.1. Group of local government - policy implementers (Mr. Le Xuan Phung and Ms. Dinh Thi Van)
a. Does Vietnam's fiscal policy dealing with Covid 19 leave you impressed?
Recently, policies, especially fiscal policies, have played an extremely important role in supporting the economy, businesses, and people to develop in our locality. There are policies that have made a deep impression such as the Government's Resolution No. 68/NQ-CP: On a number of policies to support workers and employers in difficulty due to the COVID-19 pandemic. Specifically, working people who lost their jobs/were temporarily unemployed before the directive on social isolation - cash assistance (up to VND 1,500,000 per person per month for 6 months) - improved income, improved difficulties. In addition, the employer is entitled to apply a payment rate of 0% of the salary fund as a basis for social insurance payment. In addition to Resolution No. 68/NQ-CP, we were particularly impressed by Resolution 128/NQ-CP providing temporary covid-19 control. (11/10/2021)
Temporary disassembly for localities certain difficulties - creating conditions for localities to recover the economy
For production and service activities. The most popular are restaurants/eateries, traditional markets, and commercial centers that have opened. Postpone business taxes for eligible households.
Circulation and transportation of goods in the province or intercity are back in operation, stimulating supply and demand.
Cash transfers to patients with F0 - entitled to cash support during quarantine
Invest in additional medical supplies - new and effective equipment
b. What are the difficulties when your locality applies this resolution?
In the process of implementing the policy in Thanh Hoa, we have encountered many inadequacies and also difficulties such as:
The policy has many new/unspecified changes - sometimes confusing to applied
Officials and civil servants both take care of the lives of local people and outline new ways so that the local economy and culture do not leave behind but still grow - sometimes overloaded.
F0 officials still have to go to work because of a lack of human resources and not being given adequate conditions
Limited budget
People are confused, not proactive - sometimes causing difficulties, thinking that the authorities are "too serious, not flexible".
In 7 groups of subjects supported, some were inadequately supported. For example, local farmers should be given more support than those who do not yet exist locally and are not too seriously affected such as "shoe polishing, selling lottery tickets"
c. What are your comments and contributions to fiscal policy 2022 in general and the directives that are about to be issued in particular?
The state has created the full conditions for localities to rise during the pandemic, however, there are still many aspects that are not really effective. We hope that the following comments can represent the whole locality so that they can partly contribute to the state in the following resolutions:
The policy after revision at each period compared to the previous period often has many changes. Hopefully, localities can get more instructional texts with more practical, specific content and implementation.
Listen to the people more so that the directives after being issued will be easy to apply
Anticipate and take measures to resolve in advance the situations that may arise during the implementation of the resolution
2.2. Working people's Group - Beneficiaries of policies (Ms. Ta Thi Xuyen, and Ms. Do Thi Hong Gam).
a. The impact of the disease on your life?
In general, the epidemic also affects the lives of our people. However, thanks to the state's quick pushback, working people like us are extremely excited to gradually return to the normal pace of life and in addition the support from the state.
b. What support do you have/are receiving? Do you know what kind of policy that support comes from?
Thanks to news programs, we have gained more information and understanding about policies. We have received a lot of support from the state. In times of difficult pandemics, our people are very grateful to the state for their support, we are very assured of economic development. Farmers, even those who are elderly, receive full subsidies. Workers who unfortunately suffer from F0 also receive subsidies from the company and the locality. Or as if we are reduced, exempted from some agricultural taxes, provided with plant varieties and livestock, supporting livelihood capital. However, there are also inadequacies, it is very difficult for our people that the output of the breed is a bit difficult, due to the complicated epidemic, so our trading activities are much limited and sometimes do not make a profit. But in general, our people are still very excited to receive the support of the state.
3. Evaluation of the situation of policy implementation through the interview:
First, state policies are implemented locally quickly and effectively. The people and local authorities agreed, there were no discontents on both sides during the implementation of the resolution and policy. Secondly, people always watch regularly (through news channels, radio, news), trust, and have a positive attitude toward the state's policies to help the country's economy recover and grow. Third, officials at all levels of government have never hesitated before the policies/decrees put forth by the government has put in place to help the economy recover to its former state.
However, the inspection and supervision in the locality are limited, leading to the fact that the livelihood capital has been supported but not profitable, and the profit earned is not guaranteed for the people. Besides, the applicable policies do not have much clarity and specificity to apply effectively, creating higher benefits for the development.
4. Lessons learned for Fiscal Policy 2020-2021
Firstly, timely adjusting policies in the context of epidemics is an important and practical solution to help businesses, organizations, and individuals overcome the difficulties of the COVID-19 pandemic. Secondly, in the context of difficulties, it is necessary to strengthen inspection and supervision in tax collection management and combat tax losses; implementing measures to enforce tax debts to recover outstanding debts and limit the arising of new tax debts should be of special concern. Third, in unusual contexts, it is necessary to have quick and flexible solutions even beyond the usual framework. Fourth, it is necessary to continue to take proactive, drastic, active, and positive measures in saving spending from the State budget, coordinating ministries, sectors, and localities in making and complying with investment expenditure estimates. The finalization of the legal framework for management and allocation of public investment should continue to be implemented to better suit the conditions of policy implementation in Vietnam.
5. Suggestions for Fiscal Policy 2022
Firstly, the State should have policy solutions to monitor and evaluate the estimation and observance of the State budget at all levels. Secondly, due to the impact of the Covid-19 epidemic, it poses a series of issues related to people's social security and the risk of bankruptcy of enterprises. Therefore, in order to carry out economic restructuring for the period 2021-2030, Vietnam needs to consider expanding fiscal policy support packages to support people and businesses to recover from the epidemic.
Conclude
Implementing the fiscal policy in 2021 well in the context of the epidemic is still complicated and the economy has not really made breakthroughs in the growth model will be a very difficult task. In 2022, it is necessary to continue implementing the principle of fiscal policy management that is proactive, and flexible in short-term improvisation but adheres to the principles of budget balance and financial discipline in the long term. The COVID-19 epidemic is an abnormal phenomenon, so it is also necessary to have specific solutions to be able to cope as dearest Uncle Ho once wrote: "dĩ bất biến, ứng vạn biến". It means taking the unchanging to deal with all the changing things (of the world).
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