Vietnamese Prime Minister Nguyen Tan Dung has agreed to use the announced US$1 billion economic stimulus package to help the country's small and medium-sized enterprises (SMEs) to maintain production and boost exports this year, the local newspaper Labor reported on Friday.

According to the government's decision, most of the package will be used to cover 4 percent of the interest rate on loans made by local SMEs, aiming at boosting production and ensuring employment in the year to come.

The subsidies will take effect from January 2009 and will be in place for a maximum of 12 months.

Local companies, however, using loans for importing of non-essential goods or investment in real estate and securities businesses, are not eligible to receive the subsidies, said Dung.

Dung also agreed to provide credit guarantees for companies with chartered capital of no more than US$1.17 million and employment of fewer than 500 workers. A loan guarantee fund worth US$11.76 million would be set up to ensure the credit flowing.

Regarding tax issues, the Prime Minister said that it is necessary to allow tax payment deferments, reductions and exemptions for businesses to remove obstacles hindering production and exports.

Vietnam's economy grew 6.23 percent in 2008, lower the government's target of 6.7 percent. Vietnam targeted 6.5 percent economic growth rate in 2009.

(Xinhua News Agency January 16, 2009)