Businesses Stand United against Hardships

10:47:09 AM | 20/4/2020

As a highly open economy, Vietnam is facing severe impacts caused by the Covid-19 pandemic and global recession. The frontline force that works to continue business activities during the tough time and adopt restructuring to recover and develop after the pandemic is the entrepreneur force, which is leading nearly 800,000 businesses and over 5 million business households nationwide.

According to a survey conducted by the Vietnam Chamber of Commerce and Industry (VCCI), if the plague worsens, nearly 30% of companies can only operate for no more than 3 months and 50% can survive only half a year. Over 75% said they would have to downsize the workforce and nearly 10% would have to cut staff by 50%. Only less than 1% would recruit more workers. If this trend persists, millions of workers will be thrown out of work in the coming months.

Having seen this prospect, the Government has introduced many solutions to support businesses against their hardships, including a VND300 trillion credit package to help capital-short companies and extend debts for continued operations. Decree 41 extends the payment deadline of value-added tax, corporate income tax, personal income tax and land rent worth VND180 trillion (US$7.7 billion).

However, in fact, companies must cope with many problems. At the video conference between VCCI and business associations in early April, Dr. Vu Tien Loc, President of VCCI, said that the Government needs to allow and facilitate businesses to keep manufacturing and distributing goods, especially essential consumer goods. The Government also should allow companies to resume business operations and continue ongoing construction sites which were suspended due to misinterpretation of the Prime Minister’s quarantine order.

In addition, the Government should publish a list of essential commodities to facilitate production and distribution of these items and related goods and services across supply chains, even in case of tighter social distancing or lockdown. The Prime Minister’s instruction must be strictly respected. No inspections into enterprises are conducted for the time being and auditing should be used rather than pre-check.

According to VCCI President Loc, commercial banks are recommended not only to restructure debts, reduce loan costs and exempt service fees for small transactions, but also strive to lower lending rates by 2- 2.5% more for each group of customers during the time of the epidemic. VCCI has asked the financial sector not only to reschedule and postpone current taxes but also propose the Government to submit exemption and reduction of corporate income tax, personal income tax, VAT and some other taxes and fees to the National Assembly.

“Currently, businesses strongly recommend amendments to Clause 3, Article 8 of Decree 20 and request retroactive interest expenses, not being deducted for affiliated transactions for enterprises in 2017 and 2018. This is a legitimate right of enterprises and can be achieved by reducing future taxes payable to businesses. And, we do not have to worry about negative consequences that may arise from retroactive implementation when this is done publicly and transparently, supervised by the masses, and audited according to regulations,” he said.

According to VCCI, base salary should not be increased in 2021, and union dues should not be collected until the end of 2020 and reduced from 2% to 1% at least in 2020 and 2021. The unemployment insurance fund should stop and reduce the unemployment premium rate from 1% to 0.5% for at least 6-12 months.

At the same time, the balance fund of the social insurance fund should be used to support companies to pay salaries when their employees have to quit their jobs because of underemployment. This surplus fund plus zero-interest loans from the Vietnam Bank for Social Policies will support businesses to pay salaries to their employees.

“A flexible wage regime should be introduced in this current difficult context. This content in the Labor Code should be implemented sooner,” he added.

On logistics, according to VCCI President Loc, seaport fees should be reduced by 50%, and the Ministry of Transport must work with foreign shipping lines to request to reduce excessive and improper logistics surcharges as now. On road transport, the toll collection time should be extended to reduce BOT costs.

On tourism, 50% of tourism deposits in 2020 will be used to support business operations or tourism deposits will be reduced by 50% in 2020 and 2021. Land rents should be reduced for hotels and resorts. Support measures need to be implemented quickly, ensuring efficiency, publicity and transparency, upholding accountability.

“We also suggest rapidly building e-government, accelerating institutional reform, and drastically reducing and simplifying procedures. In the current context, fees for administrative procedures and public services related to enterprises’ production and business activities should be exempted,” he said.

At the same time, good policies are needed to take advantage of opportunities from economic restructuring when the pandemic is pushed back. Particularly, promoting the development of the domestic market and supporting industries is an important approach. Certainly, post-pandemic national development policies will also move more towards this direction and Vietnam is no exception.

By far, the Covid-19 epidemic outbreak has shown Vietnam’s excessive reliance on foreign markets, both on input and output. This is a very weak point of Vietnam’s economy.

Dr. Loc said, the business community must immediately take measures to cut costs, tap the domestic market, strengthen connectivity and develop the local market. More than ever, business linkage is extremely important. At the same time, businesses should further train their employees during this time. Meanwhile, the Government supposedly uses unemployment insurance funds to assist businesses in this work. Business, strategic and governance restructuring towards sustainability should also be focused on. The next step is to boost digital transformation and to further uphold entrepreneurship in all Vietnamese businesses.

 

Mr. Nicolas Audier  - Chairman of EuroCham

On March 31, 2020, the Prime Minister of Vietnam issued Directive 16/CT-TTg on the implementation of urgent measures to prevent and combat Covid-19 epidemic. EuroCham highly appreciates the timely and drastic actions of the entire Vietnamese political system, especially the call of the General Secretary, President Nguyen Phu Trong, and the guidance of the Government and Prime Minister Nguyen Xuan Phuc, and believes that with the current measures, the disease will be quickly repelled, and the economy will return to normal activities soon. We suggest adding some points as follows:

The Government should consider putting employees' income tax into the list of tax payment extension so that enterprises will have more cash flow for production and business activities; supplement the Special Income Tax and at the same time allow the extension of the time limit for paying Special Income taxes arising from March to September 2020; consider additional measures such as tax exemptions, and the expansion of preferential treatment due to the impact of the disease; expand the subjects who are entitled to the extension of social insurance payment. The disease is still under control, the Government should not restrict production and service activities for production and business of businesses, maintaining production (especially for export) will create favorable conditions for businesses and workers to maintain their revenue at least through the pandemic. The Government should consider fast approval of chemicals needed for Covid-19 testing as well as alternative medical products during the epidemic, without closing the border for goods, especially the border with Laos, Cambodia. It is necessary to streamline administrative procedures, especially in the field of customs, so that enterprises can have production materials as quickly as possible and at the same time minimize the need for direct contact with state agencies.

Mr. Kim Heung Soo, Chairman of KOCHAM

The damage caused by Covid-19 has been and will continue to spread worldwide, not just in some countries, and many experts and companies worry that this will lead to many different difficulties. Fortunately, on March 7, the Vietnamese Government announced a support policy of up to VND280 trillion, including a credit support package, and a support package for tax and fee exemptions and other fees, bringing hope to many businesses affected.

We recognize that the epidemic causes serious losses not only to FDI companies, including Korean companies, but also affects companies in Vietnam and the economy in general. Therefore, KOCHAM has some recommendations as follows:

For a workplace that is suspended or blocked by government order, it is recommended that the Government issue a special circular to allow businesses to let employees quit salaries without agreement with workers because under the labor law, business owners must agree with workers to leave without pay without agreement; newly issue work permits, visas for foreigners who have entered Vietnam before the outbreak; allow foreigners, businessmen, experts, and business partners to enter Vietnam; provide financial support for businesses in the downturn, support both service businesses, expand the scope and scale of support; defer corporate income tax payment; reduce utility costs for businesses such as electricity, water, social insurance, industrial park management fees; postpone time for carrying out procedures for initial investment capital contribution and exemption from import tax on factory installation machines due to import postponement of new investment companies; and postpone regular tax and customs inspections this year.

KOCHAM sincerely wishes that the damage of the Covid-19 epidemic to businesses and all Vietnamese people would be minimized. We hope that the Vietnamese government will consider the above recommendations and urgently develop more practical support policies to help businesses overcome this crisis.

Ms. Mary Tarnowka, Executive Director of AmCham Vietnam in HCM City

I want to convey the continuing appreciation of AmCham Vietnam-Ho Chi Minh for the effectiveness of pragmatic and decisive actions taken by Vietnamese Government leaders and the incredible dedication of Vietnamese officials, as well as the transparency of information being shared by official notices, emails, and texts.

AmCham Vietnam leadership and our members are committed to support Vietnamese Government measures to respond to the Covid-19 pandemic. We value the health and safety of our employees and their families. We also want to minimize the economic and social costs to Vietnam and its people. Vietnam is the country where we live and work, where we call “home” and in whose success we are invested. In order to minimize the damage caused by Covid-19, we have some recommendations to the Vietnamese government as follows: Flexibility to allow defending filing and payment of Corporate Income Tax, VAT and withholding taxes. Carry-backwards of 2020 losses to apply to 2019 profits for purposes of Corporate Income Tax; Payment of Employment Insurance to workers who are partially unemployed but not completely separated from their positions, so that they may continue to stay in the system for unemployment insurance, health insurance, social insurance, etc., even while payments are deferred for several months; Liberalization of criteria to allow provision of loans and provision of low-interest loans; Flexibility at least short-term to e-file documentation which would normally be required in hard copy, and waiver of normally required consular authentication or notarization; Flexibility on policies for extension of visas, and provisions for Work permits and Temporary residence Cards, etc; Allow professional services in office buildings to maintain minimum staff and functions essential to their own business.

We request, that in order to ensure essential needs of the population, other service establishments be allowed to continue operations, including but not limited to: Warehousing, logistics, supply chain, and express delivery services, particularly for essential goods; Food and beverage distribution and sales; petrol and oil sales; hotels and places of accommodation; transportation and delivery by taxi or motorbike services, with extra attention to hygiene, to facilitate e-commerce and delivery services; banking services; telecommunication, internet and postal services; basic utilities: electrical, water, and waste management services; janitorial laundry, and cleaning services and other services required to maintain safety, sanitation, and essential operation of residences and essential businesses.

In addition, as noted earlier, we request that all other non-retail professional services, such as legal and consulting services, investment companies, private education institutions, as well as non-governmental organizations such as business chambers, be allowed to operate largely through telecommuting, with minimal office staffing as required to ensure continuity of basic operations, including use of VAT invoicing and the company chop.

We understand the outbreak situation continues to evolve and additional measures may need to be taken. That said, when and if additional measures need to be taken, we respectfully request that, in order to ensure essential needs of the population and minimize the negative economic impact, essential/critical manufacturing and production industries be allowed to continue operations, including but not limited to manufacturing and related supply-chain manufacturing and production of: Food and beverages; health and hygiene products; pharmaceutical products, medical and surgical equipment, and medical devices; personal protective equipment (PPE); disinfectants and cleaning products; critical infrastructure, including the electrical and electronic sector; animal food, feed, and ingredients, including veterinary drugs and chemicals used by essential industries.

Mr. Chu Tien Dung, Chairman of the HCM City Business Association

There are many policies; however, they need to be most responsive to life, most practical, most feasible and predictive. Taking tax reduction and extension policies as example, if policy makers believe that enterprises still can pay taxes this year to ensure the fiscal income for the State coffers, these policies will be infeasible because it is impossible to know when the epidemic will end and when enterprises can recover.

It is important to make policies transparent and easily executed. Although the banking sector has many policies, each bank itself needs to publicly announce criteria, subjects, beneficiaries, procedures and time-limit for settlement.

Policies can be divided into two groups: Emergency assistance policy and development stabilization policy. Currently, policies mainly focus on emergency issues while making light of stabilization and development aspects.

Production stabilization policies need to separate: input costs, output costs and production costs. What the government can intervene should be reduced most (energy price, tax, procedure, location, transportation and customs). Preparations for the time after the end of the Covid-19 epidemic should be discussed soon.

As for essential services, it is advisable to stop rather than continue production. If being stopped, clear support policies should be in place immediately, while only administrative orders are used for the time being. At the same time, top-down policies should be used rather than by locality. Some provinces want to quarantine people from Hanoi and Ho Chi Minh City and this affects freighters. Businesses have to deal with different scenarios in different localities.

Ms. Vu Kim Hanh, Chairwoman of the High-quality Vietnamese Products Business Association

Presently, as enterprises are confronting business hardships and dealing with high inventories, we should promote support for Vietnamese manufacturers.

In addition, it is necessary to make policies transparent and explain implementation progress. Policies should certainly focus on essential industries, but they also cover some other industries as well, such as office stationery. Is this an essential industry or not? This industry is also confronting hardships and serving education. We necessarily take production chains and input sectors for essential industries into consideration.

In addition, some localities are banning mobility. This affects businesses and commodity circulation.

Particularly, it is important to retain workers and keep the labor force throughout the epidemic. Labor is the strength of Vietnam. Trying to keep the labor force through the epidemic will enable us to restore production immediately. Employee policies not only temporarily relieve hunger, but also provide extra training for workers to prepare for the future.

Mr. Truong Van Cam, Vice Chairman and General Secretary of the Vietnam Textile and Apparel Association (Vitas)

Over 90% of garment and textile producers are affected by the epidemic. Redundancies will rise to 30% in April and to 50% in May. If the plague is controlled soon, recovery is expected in June.

Currently, garment and textile companies are under heavy pressure as they are trying to prevent the contagion on the one hand (just one worker being infected means the whole factory will have to be closed, while the number of workers is great) and maintain production (reducing input and output markets), search for markets and produce face masks on the other.

It is necessary to quickly and drastically implement support policies. If policies need to be appraised and inspected, companies will go bankrupt and workers will lose their jobs before they get support.

Therefore, in the near future, paying health insurance and social insurance premiums should be halted before considering a reduction or exemption of these items for enterprises. Input costs should be slashed for them, including BOT fees, electricity and water prices (reducing for operational businesses right away).

In the long run, it is essential to develop supporting industries, plan textile industrial parks, revise down VAT on domestic fabric production (domestic production is being now imposed 10% while import duty is 0%), reduce unemployment insurance premiums for both employers and employees from 1% to 0.5%, exempt trade union dues in 2020, and then reduce to 1% from the following years.

Mr. Pham Dinh Doan, Chairman of Phu Thai Group

The entrepreneur is one of frontline forces in the fight against the epidemic and economic recession. Therefore, the business community needs a “stimulant” to enhance resistance and a specific “cure” for each industry. Stimulants are easily applied.

Debt payment should be extended for companies by three months. Corporate income tax payment deadline should be extended to the third quarter of 2020. Workers need to accept partial salary payment and get the rest in the future.

Input costs should be reduced, particularly traffic tolls. It is time to call all to reduce space rents for business operations.

More companies should be allowed to be operational during the social distancing period. Companies should maintain operations on the one hand  and prevent the epidemic on the other.

By Anh Mai – Bui Lien, Vietnam Business Forum