Second Vietnamese stimulus package unnecessary, economists say

Hanoi - Several Vietnamese economists on Wednesday criticized a government decision over the weekend to continue a government economic stimulus package into next year. The government decided Saturday to continue through March a programme that has offered subsidies of 4 per cent for interest payments on short-term loans for qualifying companies to boost economic activity. A programme of 2-per-cent subsidies for longer term loans is to continue through the end of 2010. 'I think it's not necessary to extend the interest-rate subsidy for businesses for another quarter,' said Tran Du Lich, director of Ho Chi Minh City's Institute for Economic Research and a member of the country's National Assembly. Lich said the initial stimulus package, which began in January, has been helpful, but that a second stimulus would be excessive. He worried that it would increase businesses' reliance on government rather than encouraging restructuring or entrepreneurship. Nguyen Quang A, an economist who headed the independent Institute of Development Studies before the government effectively barred independent think tanks in September, said the implementation of the first stimulus package had been 'nonsensical.' A said many companies that needed no interest-rate subsidies received them while companies in need of subsidies were ignored. Ha Van Hien, the chairman of the National Assembly's economic and budget committee, asked the government this month to halt the current stimulus package's 4-per-cent loan subsidies at the end of the year. Some experts were more supportive. Senior economist Le Dang Doanh and Nguyen Tran Bat, chairman of the Investconsult Group, said the stimulus might be warranted but that the government should clarify the exact nature of the spending. 'The Vietnamese government has acted in line with many countries' in extending its stimulus spending to avoid slipping back into recession, Bat said. 'My company does not need the interest-rate subsidy, but as a business, I welcome it,' said Pham Thi Lieu, chief executive of MSA-Hapro Co Ltd, a partially state-owned textile and garment business. 'Two per cent is much better than nothing.' The government did not reveal how much money would be spent on the second stimulus package but said it would be less than the first package. The government announced in April that it would spend 8 billion dollars in stimulus money through the end of 2010 in a bid to boost economic growth, including 1 billion dollars in corporate tax reductions and 1 billion dollars to provide interest-rate subsidies. The State Bank of Vietnam said last week that about 500 million dollars was given to ineligible recipients, such as large companies who deposited the money in banks to profit from the spread in rates.