Economic resilience needed post pandemic

Saigon Investment
(SGI) - The Covid-19 pandemic has had an unprecedented harmful impact on the global economy as well as the individual economies of several countries. 

Illustrative photo.

Illustrative photo.

Governments of many countries have implemented several policy solutions to overcome the disastrous effects of the pandemic and are struggling to restore their economies. In this effort, reforms and improvement of business environment are being considered as key solutions.

Reopening economies

Support solutions to restore the economy are divided into three phases. In the first phase the pandemic must be totally suppressed and controlled. In the second phase the economy must be reopened gradually, and in the third phase there must be a strong move to recover and build resilience within the economy.

When the economy reopens again after a long period of lockdown, the solutions applied are usually the government's approach to a technology based model of Government-To-Business (G2B), to provide online public services to people and businesses. However, it is too early to assess the effectiveness of solutions for reopening the economy while the pandemic is still raging, but based on international experience, some lessons can be drawn.

The first is more flexibility in regulations, which must not compromise the results and effectiveness of public policy. The second must be timely and clear communication on policy solutions to ensure that businesses are aware of the latest changes and guidelines. This is especially important as the pandemic continues and policies must also be adjusted accordingly. The third solution calls for regular consultations with the private sector and accurate and timely data to allow the government to monitor the impact of the crisis.

The fourth solution must provide online G2B services in the context of social distancing. It is no coincidence that the Covid-19 pandemic has accelerated the trend of digitization. However, technology is not a magic wand, especially for countries that lack essential infrastructure and legal bases, hence digitalization is still not possible in a few weeks. Therefore, in many cases, simplifying or changing the institution before services are made available online is the preferred solution. Finally, the crisis can be the catalyst for reform. Some countries have taken advantage of the opportunity to offer solutions that not only help navigate through this crisis but also create a basis for sustainable and long-term improvement of the business environment.

Institutional reforms

Currently, creating a healthy business environment is extremely important to ensure economic recovery and restore investor confidence. In the medium and long term, the business environment will affect how the pandemic is overcome and how well businesses take advantage of opportunities when they begin the recovery process. Therefore, having effective, predictable legislation, a fair business environment that promotes competition, and institutions that guarantee asset protection and contractual rights, will make it easier to start a business as well as adapt to new regulations and rapidly shift business activities to meet new market needs. As a result, governments can take advantage of the Covid-19 pandemic crisis to implement stronger reforms.

In the above context, the Vietnamese government has promptly issued policies to support businesses and people in response to the pandemic, such as reducing interest rates, restructuring debt, reducing and simplifying payment of taxes and social insurance, exempting or reducing fees for a number of public services, and exemption or reduction of land rents, besides offering welfare support packages of VND 62,000 bn in 2020 and VND 26,000 bn in 2021.

However, in terms of implementation, the effectiveness of some support packages is not high. The spirit of reducing, loosening, and being flexible in applying regulations to support businesses to cope with the pandemic is still lacking. While the pandemic is still spreading and adversely affecting business investment, it is proposed to apply barcodes, attach dash cams, and force electronic trading floors to declare and pay taxes on behalf of sellers. These are some typical examples.

However, it is worth mentioning that reform and improvement of the business environment, in general, have stalled since the outbreak of the disease. The analysis and assessment to identify potential areas, policy priorities, and focus of institutional reforms for rapid growth recovery after the pandemic is still unclear. The policy making process and agenda of the competent authorities is not much different from before.

Vietnam needs investments

As we all know, the quality of the institutions that govern the business environment such as public administration efficiency, level of corruption, and protection of property ownership, all have a positive impact on attracting investment, especially for foreign investment.

Prime Minister Pham Minh Chinh has just signed Decision 1242/QD-TTG to establish a special working group to work under the Prime Minister on reviewing and removing difficulties and obstacles, and promoting the implementation of investment projects. The establishment of this working group is based on the reorganization of the working group to promote foreign investment cooperation established under Decision 850/QD-TTG dated 17 June, 2020, also approved by the Prime Minister, mainly to improve the efficiency of foreign investment in both quantity and quality.

According to Decision 1242, the working group is responsible for reviewing and summarizing difficulties and obstacles in the process of implementing investment projects, and explain and guide the uniform implementation of the provisions of the law on investment and related regulations. In addition, the working group will assist the Prime Minister to direct and coordinate activities among ministries, related branches, and localities to solve problems arising during the implementation of investment projects. The group will also propose ways to handle problems within the workings of competent authorities and urge and supervise the process of solving difficulties and problems. That is to say, focus must be directed to specific projects, and not general investment promotion.

The purpose of the working group is to actively attract investment, search for quality investors, and select good projects according to our criteria, as well as create the best conditions for the project, including solving difficulties and problems; design a good mechanism for the projects to quickly deploy; and hence promote socio-economic efficiency. This is because there are projects that are good in terms of profit for investors, but not for society as a whole.

In fact, so far we still do not have a complete set of criteria with specific quantification to select investors. Therefore, it is time for us to be more selective and change our approach, which will be the first step in attracting better investment projects. Accordingly, we must clearly define the attractiveness criteria, which would involve filtering projects and being much more selective. It is time to be choosey and not to take anything and everything that comes our way, and also not waste resources on projects that do not bring significant added value to our society, or if the potential damage to the environment is too great.

Dr. Nguyen Dinh Cung, Former Director, Central Institute of Economic Management

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