Capital support for weathering the storm

The capital support measures implemented in reaction to Storm No. 3 (Yagi) are no longer figurative, but actual. As a result, financial support must be realistic, quick, and precisely targeted.

Coordination of Fiscal and Monetary Support

The Prime Minister has directed the State Bank of Vietnam and the banking sector to investigate policies for debt extension, postponement, rescheduling, unsecured loans, and 0% interest rates. Furthermore, the Ministry of Finance is responsible for investigating tax, fee, and charge reductions, deferrals, and exemptions.

Separating assistance programs is critical for determining their efficacy. For example, the government is taking budgetary measures such as extending the VAT reduction period, delaying tax and land rent payments, and lowering taxes and charges.

Dr. Hiep recommends specific tax, fee, and charge support policies for individuals and companies in storm-affected areas to eliminate program overlap and poor implementation.

According to the General Department of Taxation, 26 local tax departments have issued guidance on tax deferrals and exemptions, such as corporate income tax, VAT, special consumption tax, natural resources tax, and non-agricultural land use tax, for individuals and businesses affected by storms and flooding. This shows a clean separation from ongoing programs.

Similarly, the banking sector must participate in the 0% interest support package. It should be an independent program with its own worth, apart from continuing assistance packages such as the ineffectual 2% lending rate support that will expire this year, the VND 140 trillion social housing program, and the VND 30 trillion forestry and fisheries package.

Drawing on the experiences of the 2% interest rate support package, the 0% interest rate assistance should be handled by state-owned banks, particularly Agribank, which has the ability to reach distant areas. This might help solve harm in storm-prone areas like agriculture.

Need for a New Debt Restructuring Circular

Circular 02/2023/TT-NHNN (as amended by Circular 06/2024/TT-NHNN on debt restructuring, postponements, and interest reduction) needs to be extended and lending criteria adjusted for stronger support, as businesses continue to require state assistance to quickly recover their operations.

Separate from Circular 02/2023/TT-NHNN, the banking industry must immediately determine the entire level of damage, as required by the State Bank of Vietnam, by September 20, 2024. Based on this evaluation, a separate circular on debt restructuring and extensions should be sent to firms, families, and individuals in the 26 provinces and cities impacted by Storm No. 3.

A specific circular is necessary to avoid overlapping beneficiaries, spontaneous support without timelines, and the absence of clear risk provisions. With a new circular, financial institutions can easily implement support measures while ensuring the "health" of the banking system.

Expanding the Small and Medium Enterprise Support Fund

At the local level, the local credit guarantee fund is well-known, although it has not offered considerable help in recent years. In mid-2024, Mr. Nguyễn Đức Tâm, Head of the General Economic Department (Ministry of Planning and Investment), identified three significant obstacles for businesses: market, capital, and legal. Some legislation, administrative processes, standards, technical requirements, and business circumstances are still burdensome and have not been completely simplified. In certain circumstances, ministries, sectors, and municipalities have not fully engaged with companies or expressed their challenges.

These apparent issues are exacerbated by storm impacts, making now the moment for understanding and the need for government action to assist companies in overcoming the storms. The Small and Medium Enterprise Development Fund (SMEDF) is now managed by the Ministry of Planning and Investment. Since April 2024, the Fund's operations have been carried out under Decree 45/2024/ND-CP, which changes and supplements Decree 39/2019/ND-CP, with broader aims but ultimately geared at assisting innovative startups and SMEs. The Fund has a large capital base and a widespread distribution network, but its outstanding loans remain modest.

In a context where public finances cannot be spread thin, the support for rebuilding and promoting SMEs requires significant flexibility. Therefore, SMEDF is well-suited to become a "go-to" address for comprehensive support, with the ongoing mission of providing loans to innovative SMEs with viable production and business plans. Businesses impacted by the storm can be considered as "startups" to access the Fund's capital. The innovation requirement ensures that businesses focus on developing not only to weather the storm but also to adapt to current trends, grow long-term, and move toward sustainable development. This is expected to enhance support while maintaining relevance, especially in conjunction with the 0% interest rate support package.