Mr Hung said that  in the face of the global financial meltdown and economic recession, the government has made an accurate assessment of the situation and introduced urgent solutions to shield the domestic economy from further damage.  

According to the Deputy PM, the crisis has not shown signs of slowing down in Japan, Russia, East European countries, Africa and the US where many big banks and companies are on the brink of bankruptcy. It is too early to affirm that the crisis is coming to an end and the process of economic recovery could take several more years.

He said that Vietnam’s slowdown stems from weaknesses of the national economy itself, the impact of the global economic crisis, and the consequences of inflation and tight financial and monetary policies the country adopted in 2008 to rein in galloping inflation.

Though Vietnam did not fall into an economic crisis, it has faced a relatively serious slowdown and the possible return of inflation. Therefore, it has to increase budget spending to stimulate the economy and pave the way for recovery in the post-crisis period. The government has considered lowering its GDP growth target to a reasonable rate of 5 percent to ensure economic recovery and social welfare.

The Deputy PM also explained that it is necessary to increase budget spending to make up for losses as a result of stagnant production, declining oil prices and tax reductions. At the opening day of the current National Assembly session on May 20, the government proposed that the allowed budget deficit be raised from the previously set target of 4.82 percent to just under 8 percent of the GDP. Mr Hung said that the government is expected to keep the figure at around 7 percent, given the recent soaring price of oil on the global market and the implementation of measures to collect unpaid taxes and prevent inflation from returning.

The government will try to keep the budget deficit at the lowest possible rate and reduce it gradually in the following years, he said. 

Stimulus packages

Mr Hung said that the government has introduced a number of economic stimulus packages to help Vietnam overcome immediate difficulties and curb the economic slowdown. They include (1) exempting, reducing and extending the deadlines for tax payments to iron out snags for businesses and stimulate social spending, (2) offering subsidised bank loans to businesses to maintain production and trade; (3) increasing capital construction investment sourced from the State budget and government bond sales; and (4) allocating more capital from State budget to ensure social welfare and sustainable poverty reduction.

In the long term, he said these packages will facilitate economic and labour restructuring in the post-crisis period by increasing investment in infrastructure, speeding up the implementation of transport, irrigation, healthcare, education and training projects, providing more vocational training services to labourers, especially those in rural areas, and supporting businesses in updating technology so as to sharpen their competitive capacity.

These economic stimulus policies, totalling VND145 trillion (or 9 percent of the GDP), will be carried out over a fixed period, and after that, further steps will be considered by the government, said Mr Hung.

These packages, which received strong support from the people and the business community, have begun to take effect. The government has instructed ministries, sectors and localities to keep a close watch on the disbursement of capital to ensure the money is used properly.

Agriculture and rural development

Mr Hung said that after the Party Central Committee adopted a resolution on agriculture, farmers and rural development, the government and provinces and cities worked out plans of action to address immediate and long-term issues. The government also  worked out plans to cope with climate change, build new rural models, support poverty reduction in poor districts, provide know-how to farmers to increase productivity and reduce post-harvest loss, ensure national food security and train human resources for rural areas.

The government has approved a subsidy interest rate programme for farmers to help them purchase machinery, equipment and materials necessary for agricultural production and home construction. The programme aims to encourage farmers to invest in agricultural mechanisation, apply technological advances to production and build concrete houses to improve their living conditions. It also aims to stimulate spending in rural areas.

The Deputy PM said that the government has issued policies to expand outlets for farmers’ products by encouraging businesses to sign purchase contracts, building wholesale markets, and supporting trade promotion, while developing insurance services for farm products, especially rice.

He also affirmed that the government has paid special attention to rice exports to ensure national food security and benefit farmers. The government will instruct relevant ministries and the Vietnam Food Association to draw lessons from recent rice export management and make improvements to promote transparency and accountability for related parties.

Mr Hung also said that the government has instructed ministries, sectors and localities to effectively implement the investment and consumption stimulation programme to help businesses and craft villages surmount difficulties, especially in garment and seafood sectors, which employ and lay off a large number of workers.

The government has introduced policies to support laid-off workers by providing them with allowances, re-training and employment consultancy services. In addition, it is finalising policies to tighten the management of foreign workers in Vietnam.

Bauxite mining projects

Deputy PM Hung said that Vietnam is one of the few countries with a large reserve of bauxite, at a volume amounting to 5.5 billion tonnes, mostly located in the Central Highlands region. More than a decade ago, the Party and State planned to explore, exploit and process bauxite to develop the aluminium industry for socio-economic development in Vietnam and the region.

The government has developed a zoning plan for bauxite exploration, exploitation and processing in the 2007-2015 period and with vision for 2020. In the plan, the government has taken into account the socio-economic effects, the environmental impact and the possibility of establishing joint ventures with foreign companies, with a focus on ensuring security and national defence in the Central Highlands.

According to the PM, the Tan Rai and Nhan Co bauxite exploitation projects are fully capitalised by Vietnamese companies. Design and construction of the two plants is to be carried out by a Chinese company which succeeded in an open international bid. Currently, 667 foreigners (663 from China and 4 from Australia) are working on the two projects in accordance with Vietnamese law. When construction is completed, the foreign workers will hand over the plants to Vietnam and return to their countries.   

The government will draw lessons from the two projects to perfect its zoning plan for the following periods, said Mr Hung.

New economic restructuring

He also said that the government is drafting a project on restructuring the economy in the post-crisis period, which will review the impact of the crisis and forecast trends in the global economy and the relationship between the State and the market to identify economic development models in Vietnam.

The project will propose policies and solutions to (1) speed up national industrialisation and modernisation, increase the country’s economic power, (2) ensure the national economy develops steadily, efficiently and competitively in international integration, (3) combine economic development with the settlement of issues related to culture, social affairs, security and national defence, (4) quickly deal with “bottlenecks” in development, and (5) build a law-governed socialist state with a unified and efficient administration under the leadership of the Party.