Vietnamese government role in economic management during crises

'' V i e i iNaiii jf-* UPPSALA UNIVERSITY (SWEDEN) & iSITY OF ECONOMICS AND BUSINESS, VNUH liR PROGRAMME OF PUBLIC MANAGEMENT Swe and one applies developed state, which are: US .Japan, China and Vietnam Result & Conclusions: Effect of Keynes theor> in saving economy from crisis is not denied; and one of the most important factors for demand stimulus package accordino to Keynes theor>' to reach success is the role of State in econom\ According to analysis, the economy that appreciates the role of State in managemeni will be eas> to put policies of Kcwnes theor>' into realit\ to get good results Such Slates will have lower density of economic stimulus package (compared to Governmental spendins) compared to States with the economy appreciating the role of market Such analysis will give the fact that ahhough economic models have their own weaknesses and strengths, patient following market econom\ according to socialist orientation is the right wa) Howe\er, in term of pre\enting economic crisis prevention, apart from focusing on sustainable de\elopment \'iet Nam must focus on harmonizing the management of the State and the role of market manipulation This is the best alternati\e to raise the role of Vietnamese State in preventing economic crisis Suggestions for future research: Within the limits of the thesis, research the relationship bciween the opening of the econom\ in the state models and its , • v ^^wventing economic crisis has not been studied In the future, the thesis can find out the policy of the problems in preventing and controlling economic crisis Contribution of the thesis: The conclusions of the thesis showed the importance of harmonizing the management of the State and the role of market manipulation in preventing and controlling economic crisis If the management role of the state in the economy are overlooked, the application of the economic stimulus packages according to the theories of Keynes would be very difficult and expensive when the economic crisis happened Key words: Role of Keynesian theory, the relationship between the state model and method of handling the crisis, economic stimulus package TABLE OF CONTENTS INTRODUCTION CHAPTER I : THEORY ON CRISIS AND CRISIS PREVENTION 1.1 What is economic crisis ? 1.2 Keynes' theory on crisis and crisis prevention 1.3 Market economy models in the world 1.3.1 Feature of free market economy 1.3.2 Features of social market economy 1.3.3 Economic institution of developed government model 1.4 Government' role in crisis and measure to overcome crisis CHAPTER : GOVERNMENT'S POLICIES IN CRISIS j ( K I 13 2.1 Policy of US Government 2.2 Policy of Japanese Government 2.3 Policy of Chinese Government 2.4 Policy of Vietnamese Governineiil CHAPTER : THE ROLE OF STATE AND METHOD TO SOLVE CRISIS 1I 22 3.1 The role of the State in crisis 2! 3.2 Relation between the role of the State and method to treat crisis CHAPTER : IMISING THE ROLE OF STATE IN MANAGING TO PREVEP CRISIS IN VIET NAM i3 CHARTS AND TABLES Table 2.1: Structure of US' stimulus package Table 2.2: Structure of Japan's stimulus package Table 2.3: Structure of China' stimulus package Table 2.4: Summary of Vietnam's stimulus package number Tabic 2.5: Effectiveness of demand stimulus policies Table 2.6: Policy on cutting basic interest rate and reality of 2008 saving-lending intere rate Table 2.7: Structure of Vietnam's stimulus package number Table 2.8: Scale of national budge expense in comparison with Vietnam's GDP and son Asian countries Tabic 3.1: Relation between state regime and features of economic stimulus packages Table 3.2: Comparison of some governments' stimulus packages Table 3.3: Percentage comparison of economic stimulus packages Table 3.4: Comparison of some countries' demand stimulus packages' component Figure 3.1: Relation between government's role and economic stimulus package Figure 3.2: Structure of US' demand stimulus package iMgure 3.3: Structure of Japan' demand stimulus packages Figure 3.4: Structure of China' demand stimulus packages Figure 3.3: Structure of Vietnam's demand stimulus packages ABBREVIATIONS MBS Mortgage Backed Securities CDS Credit Default Swap GDP Gross Domestic Product CPI Consumer Price Index FED Federal Reserve System VAT Value Added Tax lARP Troubled Asset Relief Program ODA Official Development Assistant FDI Foreign Direct hiveslment CPI Consumer Price Index CIT Corporate Income Tax INTRODUCTION L Background to the study: The issue of economic crisis is always a hotly debatable one because of it substanti influence on the whole society The economic crisis since late 2008 has given adverse impact on global economy, leadir the world economy to the most ever serious recession since World War II This economic depress has its roots in real estate and the subprime lending crisis in the L and Wall Street financial institutions have institutionalized the lending in the form of re estate bonds to issue to foreign countries The kinds of bond are Mortgage Back( Securities - MBS and Credit Default Swap - C D S which lead to the situation that in US 22,000 billion of US real estate value, over USD 12,000 billion is debt able in which US 4,000 billion is bad debt' It is estimated that he tolal of CDS is approximately US 35,000 billion and around USD 54,600 all over the world" The other countries al: imitate the US to sell MBS in the financial markets Il is this latent reason, along wilh tl bankruptcy of Lehman Brothers Bank and then of AIG as well as hundreds of banks th has trigger the crisis, affecting a series of countries It is realiable that from the Greal Depression in the 1930s to the economic crisis in 200; many things need to be considered Although countries' financial crises are basicall similar and collaboration of goxernments is essential lo pre\enl global crisis'', il is simih to the Cireal Depress in the 1930s, there are many differences in measures and policies I deal with crisis of each Go\enimenl In the Great Depression, in spile of all countries' acknowledgement of coordination' necessity to overcome crisis, the) also intenlionalK found interest for their own countrie by laking ad\ antage of other's losses Moreover, in this period, each countr)' measures were different and because they did nc have good eooperalion to deal with common economic problems, all countries ha\e I incur disastrous losses in the Greal Depression The reasons were not identified clearh' ' '^Vietnam ccononn recovers from L'S tlnancial crisis'^" VNEconomy October 2008 " International Swap and Derivatives Association.2008 "Summaries of Market survey results" ' John 2009, pp The UK Prime Minister at that time, Ramsay MacDonald assumed that the problei originated from capitalism The German argued that the crisis had il polilical root and resulted from big \\i compensation The French claimed that the UK's irresponsible monetar> policy and the US "unemployment exportation" policy were reasons'^ The economic idea dominating in this period is the Theor\^ on self-adjusting economy claiming that supply will automatically generate demand, market mechanism will stabili: all aspect of capitalist economy, no need to government's inter\ention in economy freely floating, competing, producing and trading econom> should be encouraged It w this idea that cause economic crisis 1929-1933 to be more serious In the financial crisis 2008, each country had its own policies beside the cooperation handling crisis Besides the clear identification of reason, the fact that countries and go\emments to( timely and wise actions as well as the applicalion of Keynes lheor> in handling crisis wc conducive to the more stable condition oflhe global eeonom\ Ob\iousl_\ there is a connection between cach ct)untr\'s features which affected the measures to deal with crisis and the idenlification of this connection will help people understand the nature of those measures, from which enhances effecti\eness in prevenlii and handling crisis Reason of the study and objective of the study In general, the writer realize that there is a close relation beUveen state's role ar governments' current measure to crisis Therefore choose to research on: Victnatncse Governtnent's role in econom mana^etnerit during crises The stud\ has objeclixe to idenlif> the connection bciween slate mechanism and ways i resolve crisis, from which apply to Vielnam in order to enhance effectiveness ( pre\'cnling and o\ ereoming crisis Situation of research ' John 2009, pp 10 Relating to the issue of economic crisis, a lot of researches have been done under differen aspects Vietnam's government and Ministries also have special documents an< conferences on this issue The researches have various objective of study and draw many remarkable conclusions Within the scope of this study, I recommend the following conclusions: - Vietnam's demand stimulus policy is essential but it has not completely achieved the aii of demand stimulus packages-in the study 'The problems of the demand stimulus packag number one - lesson for Vielnam\s demand stimulus package" written by Vo Thi Thu Anh (2010) focuses on the effectiveness of the demand stimulus package number one Th writer points out 10 limitations in demand stimulus package and proposes lesson f( Vietnam's demand stimulus - Many countries such as US UK, China and Vietnam are implementing econom stimulus package which tend lo eorreel the mistake and not tend to stimulus accordir lo the Keynes theory, which is shown in the research ''Vietnam's current polic\ to prc\ei crisis Research number 1: Demand stimulus policy" Writer Ngu\en Due Ihanh ar other aulhors (2008) demand stimulus packages research on the feasibility of measures i mobili/e capital for demand stimulus policy and measure according to components of tl economy - Keynes lheor>- is the most important theor>' in pre\enling depression Writer Nguye Hoang Bao, Ho Hoai Anh, Doan Kim Thanh (2008) in the stud> "Ke>nes theor arguments and pre\enlion of economic crisis in Vietnam" have analyzed Keynes' theor arguments aboul this ihcor> and propose theoretical suggestion to stimulus demand Vietnam - State role in the market-based eeonom>- is shown in man> economic theorii (Neoclassical economies, Keynes, New liberlarianism ) and in the smd> "Role of stale the market-based econom> in some modern and conlemporar>- economic theories applicalion to Vietnam", author Pham Thi Hong Diep (2008) asserts that the govemme in the market-based socialist econom> o( X^ieinam has an important role in anii-cris policies - In the study "Global Economic Crisis and Developing Countries: Impact and Response' of Duncan Green, Richard King, and May Miller-Dawkins (2010), the authors researcl on crisis' impact on Vietnam and some Asean countries in terms of work, social stabilit> food, etc and forecast potential elements which might affect the recovery such as economic structure, government role, etc According to the writers, researches on the relation between state mechanism - role c government and way to handle crisis have not been done before Therefore I would lik to a research on the issue of economic crisis in Vietnam Research tasks In order lo achieve that goal, the study has the following specific tasks: - Systematizing theoretical questions aboul economic crisis, measures lo deal will economic crisis in the world, theory on state role in the economy - Analyzing policies to overcome crisis and effectiveness of economic stimulus policy ii Vietnam, China, US and Japan - Analyzing, commenting and make assessment oflhe relation belween State mechanism - government role and policies preventing crisis of those countries - Proposing some solutions to enhance the effecti\eness of prevent and deal with crisis ii Vielnain Research Questions: The study aims to find out answers for the follow ing questions: - Does State mechanism affect measures to deal w ith crisis? - llow to enhance the role of Vietnamese Go\emment in crisis period? Object and scope of the study Objects and scope of the study is the role of government in some economic mode in Vietnam China, US and Japan, these govemmenls' policies in crisis and stud\ tht relation between oo\crnmcnr role - policies to prc\ent crisis The scope propose: 29 Chinh phu My mac dii vSn xu ly thco tu tudng eiia Keynes nhung tap irung nhiau han vao viec giai ciru cac dinh cha tai ehinh, tranh thj trudng tai chinh sup dd Tac gia khdng xet cu tha ea eau gdi kieh cau 152 ly ( \kn 1) va 787 ty ( \kn 2) cua Chinh phii My ma xem xet mdi tuang quan giira gia tri cac gdi kich cAu so vai giai phap dn djnh thj trudng tai ehinh cua My ed gia Iri gan 1500 ty ( chuong trinh cuu trg tai san cd van da 700 ty va eiru trg cho l-annie va Freddie Mac 750 ty USD theo ly thuyat cua Keynes thi giai phap xu ly khiing hoang chi ehu trgng d van de nang cao tdng cau de nhan djnh mOre dg ap dyng cac tu tudng cua Keynes la d mirc thap TRU6NG HOP CUA NHAT BAN : Md hinh nhd nirac : Md hinh nha nude pluit trien Vai tro dieu hdnh cua nhd nude : Da cao vai trd eua thj Irudng nhian Nha nude \ an di sau hudng dan, ehi dao , dieu tiet cac hoal ddng kinh te nhSm muc dieh thuc diiy tang Irudng va phat Irian kinh te dai han Ap dung ly thuyet Keynes : Cung gidng truiyng hgp ciia My, tmrng quan giira gdi kich cau ( khoang 383 ty cho ca hai Ian ) va gdi ciru trg thi irudng tai chinh ( khoang I I ty ) thi mirc dd ap dung cac tu tudng eiia Keynes la d mire trung binh Wan nira Irong cu tha gdi kich thich cua Nhat Ban, viec da cap dan chi tiau chinh phii ( vira giiip cung cap luing hda cdng cdng - vira tang tieu dimg )nhu mgl giai phap cd sd nluin tdng cau Idn la khdng cd ( Diau na> mdt phan Chinh phu Nhat khdng the tang chi tiau cdng na cdng ciia Chinh phu Nhat da can ke 200% GDP '") TRU^ONG HOP CUA TRUNC QUOC : Md hinh nhd nude : Kinh tc lhi trudng dinh hudng xa hdi chu nghla Vai trd dieu hdnh ciia nhd nude : De cao \ trd ciia nha nuirc Ap dung ly thuyet Keynes: Chinh plui Irung Quoc dua cac giai pluip xir ly khung hoang cd ve nhu bam sat theo tu tudng cua Keynes nhung lai long ghcp cac muc lieu giai cuu muc tiau tang iruang dai han vao gdi kich can Xat Irong ca ciiu su ilung goi kich cau Iri gia 586 l> dd la cua Trung Quoc : muc tiau ho trg khac pluic thien tai chiem 25% phat Irian king giao thong 45%, xda bd chanh lech phat triC-n cho viing ndng thdn 17,5% Nau xet cu tha va ban chat \ a mirc dd uu tian cho timg bian ph.ip lhi muc tiau giai cuu \a muc iicu ()()'> " "Ui ctiuyC" giam phiil a Nh^if VNEconomy :.' Hiang I I 30 tang trudng dai han chiSm phan Idn gdi kich c^u Vi vay, mirc dg ap dung ly thuyat theo lae gia danh gia ehi d mirc trung binh TRUGfNG HOP CUA VIET NAM : Md hinh nhd nuac Kinh ta thj trudng djnh hudng xa hdi ehu nghla Vai trd dieu hdnh cua nhd nuac: Theo chu truang cua nha nude Viet Nam la : Khdng budng Idng vai trd va chirc nang quan ly eiia nha nude ddi vdi n^n kinh Ic thi trudng Tuy nhian khdng ean thiep sau nhu giai doan nan kinh ta ke hoach hda tap trung d cac nude Xa hdi chu nghTa theo md hinh eu Ap dung ly thuyet Keynes : Chinh phu Viet Nam dua eae giai phap xir ly khung hoang bam sat theo tu luirng ciia Keynes mac dii khdng hoan loan tri?t da Vice khdng hoan loan triC't de cd tha thay qua vi du : Mgt sd chinh saeh cd tha cd ieh cho vi^c tang hiau qua ciia gdi kich cau ( theo ly thuyet keynes ) nhu ehinh phii co the thuc hien bao hiem that nghiep bfing each ho tra 100% nam dau ma khong can dc^ri dong gop dii 12 thang nhim phat huy toi da cong cu bao hiem that nghiep nhung vi cac ly khac, chinh phii da lua chyn trien khai bao hiem that nghiep sau nam ke tu 1.1.2009 Cac giai phap ciia Viet Nam bao gom gan nhu day dii ca nhom bicMi phap kich cau : Nham vao nguai dan , Kich thich dau tu cho doanh nghiep, Kich thich chi tieu chinh phii va tuan thu cac tu luang ciia Keynes nhu : tap trung vao cac bien phap lao dugc so nhan k cao nhat, kich can di kem vai nang cao nang lire canh tranh quoc gia, lang chi tieu chinh plui, han che tien khong dau lu doanh nghiep ' Xet ve ca cau 49% chi tieu cho cac van de : Ciiam thue (20%), chi cho An sinh \ a hoi (5%) , Chi thong qua tin dung ( cac hinh thue ho irg lai suat - 24% ) 51% chi tieu cho xay di,rng va du an cap ihicl Day la cac du an lan ciia Chinh phii vao phat IriCn tang va chi tieu co the dugc xet vao dau lu cong Mac du khong the lugng hoa chinh xae dugc cac cau phan cu the co nhieu \ an dh chua ap dung theo Keynes nhung ea ban mue ap dung ly ilui\ct Keynes chong khiing hoang lai VicM Nam la cao Nhu vay, muc ap dung cac lu luang ciia Keynes la a muc cao Tom lai cac quan he giua mo hinh nha nuac \i\ linh chat goi kich thich kinh te cua cac nuac nghien cuu dugc tap hgp Irong bang sau : 31 Bang 3.1 : M6i quan he gifra mo hinh nha nirdc va tinh ch^t goi kich thich kinh tl Mo hinh nha nu'ac Vai tro cua nha nu-oc Mirc dp ap Tinh dung chat ly Mirc goi tac d9 Cac muc d9ng tieu khac thuyet kich cua khung Keynes thich hoang doan kinh te giai khiing khung hoang hoang My Kmh te thi Irudng Thap Thap tu kicu M y Nhat Ban The che kinh te ciia Trung Trung binh binh ciru Giai — On dinh lhi thj trudng Irudng tai chinh chinh ciru Giai Cao trucrng chinh hinh tai chinh nha nude tang long cau, dn djnh xa tai On dinh lhi thi Irudng mo phal Irien Cao tai hgi — t — • Trung Kinh le lhi Quoc Irudng dinh long cau, hdi, khac hudng on dinh phue thien X N C N (dac xa hgi, tai, tang sac Phat trien trudng diii han han Cao Trung binh Trung Quoc) Viet Nam Kinh te thi Cao Cao Tang Trung binh lang Thap On dinh xa dai • On dinh xa trudng dinh tdng cau, hoi, kiem hudng dn dinh che lam XI ICN xa hdi, phat Phat trien dai han Bang tdni ik tren dirae hip tran ca sd phmmg phiip dinh tinh vi viiy da diinh gia cu tlie han quan he gifra md hinh nhii midc - vai trd ciia nhii nude vii linii cluit goi kich ciiu \c phirang dicn quy md va hrang iida mirc d(> iip dung ly thu\at Keynes khung hoang cua cac nid hinh nha nude tiic giii se tim hiau mdi quan he giira vai trd dieu hanh ciia nha nirdc vii quy md gdi kich cau 32 b Tim hiSu mdi quan h^ giira vai tro diiu hdnh cua nhd nude vd quy mo goi kich cau: •> • Tac gia dung ph.cmg phap dinh i.ang de xem xe quy mo cua Chinh phu voi quy n,6 cua goi kich cau Quy md cua ehinh phu dugc bang hai phuang phap : Tdng sd nhan vien ehinh phd/ dan so va Chi tieu chinh phu / GDP Tuy nhian nghian cdu tac gid ehi su dung quy md Chi tiau chinh phu /GDP liim dai dien Quy md ciia ehinh phii dirge ISy tai thdi diam 2006 - thdi diam cac nC-n kinh tC- chua bi anh hu-dng bdi khung hoang Quy md ciia gdi kich cau dirge bSng Gia tri gdi kieh eSu/GDP Bang 3.2 : So sanh quy md yoi kich cau cua cac nu^dc CHI SO My Nhat Ban Vift Nam Trung Quoc Tong kich $700 ty $ 383 ty 4000 A cau GDP Tong $13,800 ty kich 5,1% $5470 ty 7,0% ty 160.000 ty NDI VND 31404,5 ty 1.600.000 NDT ty VND 12,7% 10% caii/GDP ChiticuCP/GDP Gia (1) cau/GDP tri gdi kich Ty le so sanh (2)/(I) (2) My 19,8% 5,1% 25.8% Nhat Ban 37,1% 7% 18,9% T r u n g Quoc 19,2% 12,7% 66,1% Vi?t Nam 29,79% 10% 33,56% • Xem xet theo ty le so sanh, co the nhan thay gia trj goi kich cau CiDP cua Trung Quoc va Vict Nam \an han nhieu so vai My, lu\ iihicn Vict Nam lai la nuac co chi tieu chinh phu/GDP cfing cao nhat so rurac xem xet va xet ihco quan he giua Qu\ mo ciia chinh phu va Quy mo goi kich cau lhi ; 33 Trung Qu6c ed Quy md gdi kieh eSu so vdi Quy md cua Chinh phu la idn nhdt Viet Nam cd Quy md gdi kich cAu so vdi Quy md ciia Chinh phu xap thu hai Nhat Ban cd Quy md gdi kich eSu so vdi Quy md cua Chinh phu la nhd nhk Tuy nhian, nau xem xet va quy md gdi kieh thich kinh ta ( bao gdm ea gdi kieh cdu va eac bien phap giai euu khac) thi ed sir thay doi : VS bien phap giai ciru thj trudng tai chinh, My da danh 700 ty USD cho chuong trinh TARP ( chuang trinh mua lai tai san ng xSu) , 1200 ty USD cho chuang trinh giai euu Fannie Mae & hreddie Mae ( mua lai ehirng khoan dam bao bdng tha chAp cua Fannie Mae & Freddie Mae) va mua trai phieu ehinh phu loai dai han Nhu vay : tdng kieh thich kinh te / GDP cua My la 18,84% Trudng hgp cua Nhat Ban : ong kich thich kinh te/GDP ciia Nhat Ban la 9% Bang 3.3 : Ty I? so sanh cac gdi kich thich kinh te Chi tieu CP/GDP Gia tri gdi kich Ty If so sanh (I) thich kinh te/GDP (2)/(l) (2) My 19,8% 18,84% 95.1% Nhat Ban 37,1% 9% 24,26% Trung Quoc 19,2% 12,7% 66,1% Vi|t Nam 29,79% 10% 33,56% • Ty gdi kich cau Ty gdi kich thich ( la Idn nhat) kinh te (1 la Idn nhat) My Thu Thu Nhat Ban Thir Thu Trung Quoc Thu Thu Vift Nam Thu Thu Tdm lai : Xet ve dinh Iirgng, cd tha thay : Trung Quoc vii Viet Nam de cao ly tluiyt-t Keynes vii su dung gdi kich cau chdng khung hoang lam ciiian luge chinh Vdn da xu ly khung hoang d Trung Qudc \a Viet Nam khdng tram trgng nlur d My Xet va ty trgng gdi kich thich kinh tc thi nude My da phai chi phi riit km so \di I rung Qudc va Vivt Nam de xir ly khung hoimg 34 Truang hgp cua Nhal Ban, ty Irong goi kich cau cung nhu ly Irong goi kich ihich kinh te la nho nhat T , r , % c Tim hieu moi quan he giua vai tro dieu hdnh ciia nha nu&c va cau phan goi kich cau : De CO the so sanh ca cau cac goi kich cau, tac gia the hien eau phan cac goi kich cau ciia cac nuac thco bieu sau : Bieu 3.2 : Cau phan goi kich cau cua My C a t giam thue 237 K* Giao due 141,6 K* Cham soc sire khoe 111,1 KPhue Ion xa hoi 102 K Xav duug etf sa tang 90 ty Nang lu-oiig 58 K* ^Tracap khac ^ K* Bieu 3.3 : Cau phan goi kich cau cua Nhat Ban • Tro' giup thue • Giai qu>et \ i e c lam D.Moi t r u o n g D Tiu duog cho doanh nghiep • Ho tro* tieu dung \ a tro* eap khac 35 Bi^u d^ 3.4 : C^u ph^n goi kich c4u cua Trung Qu6c ^ p Nha & cho khu vyx Doog thoD 400 K Kh^cpfapc bin qua dong dat 1000 K oQ Nang cao nang lire khu vy-c nong tbon 370 K (rCong nghe moi va eong nghiep 370 K • P T ben virng va ehi khac 210 K c D ^^^ dirng ca sa tang 1500n —Phiic loi la hpi 150 t\- Bieu 3.5 : Cau phan goi kich cau cua Viet N am D H t r a lai sua! • Dau tu* xay dung DPhat hanh them trai phieu p M i e n , giam thue • Bao lanh tin dung eho Doauh ughiep nho va \ ira n Au sinh \ a hoi Chung ta co bang Ihong kc sau : Bang 3.4 : So sanh cau phan goi kich cau cua cac nirac My Nhat Ban Trung Viet Nam Quoc Try thue dung