Businesses Struggling to Seek Access to Support

10:14:59 AM | 18/5/2020

According to the Vietnam Chamber of Commerce and Industry (VCCI), with businesses facing increasingly serious situations, if businesses are not quickly supported, they won’t survive until government-backed relief is delivered.

Difficult to access support

Up to now, VCCI has collected over 200 proposals and recommendations from enterprises. Among them, over 50 petitions were reported to the Prime Minister and reflected in Directive 11/CT-TTg and nearly 150 suggestions were gathered after the Prime Minister issued Directives 11, 15, and 16; Decree 41/2020/ND-CP, Resolution 42/NQ-CP and guiding documents from central authorities.

According to a report on performance and recommendations of the business community submitted to the Government by VCCI, actions taken by central and local authorities are still quite slow, not as requested as in the Prime Minister’s guidance “fighting the pandemic like fighting the enemy”.

Although Directive 11/CT-TTg (the earliest directive on business support) was issued nearly two months ago, many enterprises have reportedly been unable to access mechanisms and policies from competent authorities. They still have to pay taxes, fees, charges, land rents and bank loans as before the epidemic outbreak. Requests sent to tax agencies and banks have not been reviewed and resolved because they are waiting for instructions from their superiors. Enterprises understand that the introduction of mechanisms and policies in the context of the pandemic is unprecedented and difficult to fully and promptly meet actual requirements, but they expect more rapid progress with the direct involvement of policy enforcement agencies.

On the other hand, VCCI's report stated that most policies and measures concerning business support are mainly about postponed or rescheduled fulfilment of obligations such as taxes, union dues, social insurance and loans. Measures on payable exemption and reduction are almost unavailable.

Given adverse effects of the Covid-19 epidemic, many difficulties and obstacles to businesses are aggravating on a wider scale, seen in almost all industries, scales and fields of business. This requires stronger, more comprehensive solutions to support businesses to overcome hardships to develop more stably. VCCI recommends that business support packages need to be expanded in scale, accelerated in speed and targeted to the right recipients.

VCCI recommends that the public and transparent reform of administrative procedures in business support policy making and enforcement also need to be done more thoroughly, openly and conscientiously from responsible competent authorities. The coordination of competent ministries in carrying out business support policies is still inadequate. Rice export disruption and face mask export delay are typical examples.

The harmonious response of localities to the Government in assisting businesses to tackle their difficulties and obstacles should also be strengthened. In addition to the Government’s general mechanisms and policies, some localities have actively made their own mechanisms and policies to quickly help local businesses, like Hanoi and Ho Chi Minh City. However, many are still passive, reliant on common policies. Some even misunderstand the spirit of the Prime Minister's directives and instructions, causing more difficulty in business to companies.

Reasons

Businesses report some main reasons why they do not have access to support policies. For example, the regulation on 50% of layoffs and 50% of property damage caused by the pandemic are hard to be carried out in reality. Administrative procedures require them to show proofs and have ratifications from policy enforcement agencies. In some other cases, there may be undesirable effects. For example, some may force more workers to quit jobs to reach the limit of 50% of layoffs to be entitled to support or some may exercise “give and take” facilitation to get aid. On the other hand, it is inadequate and unreasonable for businesses with layoffs and property damage below 50% because they will not be able to access the relief.

Administrative procedures to get support draw the most complaints from many companies. Although mechanisms and policies are relatively clear, a lot of matters arise at the enforcement level. For example, enterprises must prove the extent of damage and pay old loans to get new preferential loans. To get zero-interest loans from the policy bank, they must pay social insurance in full in the first quarter of 2020. If they want to delay paying social insurance, they must get the consent of both the Departments of Labor, Invalids and Social Affairs and the Vietnam Social Security. They are forced to sign an appendix to labor contracts or unpaid leave forms while their employees already left for their distant hometown.

Many were annoyed because the General Department of Customs “secretly” opened declarations for export of 400,000 tons of rice in the middle of the night. Trung An High-tech Agricultural Joint Stock Company sent four times urgent settlement requests to the Prime Minister, asking to prevent retaliatory action of customs authorities by assigning its rice to red flow which requires more time and costs to get cleared.

VCCI cited an enterprise as saying that the text of State policies is very fine but the action is very bad. High authorities are very open, friendly but enforcement agencies (e.g. insurance, tax and bank) squeezed them tightly. This is really difficult for them to overcome barriers to enjoy support policies.

The guidance on implementation of support mechanisms and policies is slow at competent agencies. Many businesses submitted applications to banking, taxation and social security agencies but they had to wait because enforcement agencies need specific instructions from their superiors.

Credit mechanisms and policies such as interest rate reduction and debt rescheduling are difficult to be executed because commercial banks are also enterprises and they have to accept to reduce costs and profits to have support for their customers. Not all commercial banks are willing to ‘sacrifice’ these benefits to share hardships with businesses, especially joint stock commercial banks and small banks. In addition, lenders are also concerned about the liquidity after the epidemic and they thus act with high caution when they consider new loans to corporate customers, especially for micro and small companies without collateral. Some sectors are not yet included on the aid list although almost all businesses in those sectors are affected by the Covid-19 pandemic.

Before many reflections from businesses, VCCI gathered and made a report on more than 150 recommendations to the Prime Minister. These are flexible and important solutions on fiscal and credit policies suitable for businesses in different fields, sizes and localities.

One of the first solutions put forth by VCCI, in addition to extended deadline policy, is VCCI asks the Government to submit to the National Assembly for approval of a 50% exemption of land rent, a 50% of value-added tax (VAT), a 50% reduction of corporate income tax, and personal income tax cut together with the increased value for household dependents in 2020. According to many businesses, this is the most effective, practical and urgent solution for them today. VCCI also asks for the deadline extension of export tax payment till the end of 2020 to help exporters with more funds to boost exports. The agency also asks for refunding VAT to some industries seriously affected by Covid-19 like aviation, tourism and transportation.

Mr. Nicolas Audier - Chairman of EuroCham

Vietnam is currently a front-runner of the world in the fight against Covid-19. Strong preventive measures, including timely public health measures, and an effective economic support package, have made Vietnam a successful model of the world in the fight against Covid-19.

These strong measures have helped Vietnam maintain its economic performance (in the first quarter of 2020) and increase foreign direct investment (FDI) value. These actions have also maintained EU business confidence in Vietnam as a safe, attractive and competitive investment destination. Vietnam is now well-positioned to grasp new business opportunities and boost economic growth, thanks to the approach of simultaneously stimulating economic growth and containing the pandemic.

With the ratification of the EU - Vietnam Free Trade Agreement (EVFTA), European businesses look forward to further strengthening EU - Vietnam trade relations. This historic agreement will stimulate Vietnam's trade with a large consumer market in Europe, enhance its role in the international supply chain and attract new sources of investment. In this way, Vietnam will reduce its dependence on traditional major trading partners, as well as minimize impacts of the growing trade war and protectionism in the world.

As a country that has integrated into global supply chains and capital flows, Vietnam essentially not only protects domestic businesses but also supports foreign enterprises - an important growth driver of the country, particularly exporting activity after the Covid-19 epidemic is contained and global trade is back to normal. Vietnam can take advantage of its ASEAN Chairmanship in 2020 and its non-permanent membership of the United Nations Security Council to call for a conference to discuss economic recovery and stimulus packages and solutions to boost public investment, official development assistance for ODA, and public-private partnership projects, not only in Vietnam but also in ASEAN.

In addition, Vietnam needs to take some other measures to ensure the continuity and flexibility of the economy currently operated in the form of supply chains, maintain manufacturing, especially export-driven production, to ensure revenue and income for businesses and workers.

Mr. Hong Sun, Vice Chairman of Kocham

Korean enterprises hold high regard for Vietnam’s efforts in improving the business environment. Remarkably, Covid-19 pandemic prevention measures have strengthened the confidence of Korean business community and foreign investors in Vietnam.

To support FDI enterprises, including those from Korea, to effectively resume their business operations after the pandemic, we request the Government to reopen flight routes with countries which have basically controlled the disease like Korea for investors, experts, workers to come to Vietnam to work and return to a new normal. The Korean side will coordinate to fulfil mandatory disease prevention measures.

With a stable business environment and workable anti-epidemic solutions adopted by the Government, we will continue to introduce well-reputed businesses to invest in Vietnam as per Resolution 50 of the Politburo on selective FDI attraction.

Mr. Tran Ba ​​Duong, Chairman of Truong Hai Auto Corporation (Thaco)

In crisis times like the current Covid-19 pandemic, the Government must focus on taking care of the poor and supporting businesses, with first priority given to vulnerable business sectors such as business individuals, smallholding businesses and startups.

In economic development, good times, bad times and crisis times, big or small, are inevitable. A company may sometimes make a profit, make a loss, make a success and tolerate a failure. Therefore, with this perspective, I propose economic recovery management solutions and any market intervention of the Government at this time must rationally solve hardships with the market-based principle, to not only help businesses to overcome current problems, but also encourage them to make innovative changes for the common goal of creating a fair and transparent business environment.

With the recent successful experience in epidemic prevention, the Government continues to cooperate with relevant bodies to loosen and reopen the door to countries with low-risk exposure to the epidemic like Cambodia and Laos. Road transport may be resumed sooner to facilitate trade and business activity of companies.

In addition, it is necessary to prepare for the arrival of global production chains in the central region and Quang Nam province by improving capacity and reducing international logistics costs in Chu Lai, Quang Nam in particular, and the central region in general.

Mr. Nguyen Van Than, Chairman of the Vietnam Association of Small and Medium Enterprises

Vietnam now has 28 credit guarantee funds affiliated to provincial/municipal government with a total budget of more than VND1,450 billion. This value is too small to the business community, especially during the Covid-19 pandemic. Therefore, reforming credit guarantee funds is extremely urgent. The Government needs to consider how to get more financial resources and simplify loan guarantee procedures.

All banks consistently agreed on the ‘austerity’ policy to lower interest rates, restructure debt groups, extend repayment periods, or even delay dividend distributions to support businesses. They planned to lend up to VND600 trillion. To date, the banking industry provided new loans of VND165 trillion to more than 354,000 customers.

Currently, although the demand for borrowing money to pay wages to employees and recover business operations is still huge, companies cannot rely on banks. Therefore, we recommend unlocking and developing other resources and capital for businesses, such as increasing resources for SME support funds, especially credit guarantee funds; issuing bonds for public investment projects to mobilize foreign currencies and short-term and long-term unemployed money from the people; extending VAT payment to the end of 2020, exempting corporate income tax for SMEs and license tax for business households until the end of 2020.

Mr. Le Tien Truong, General Director of Vietnam National Textile and Garment Group (Vinatex)

The labor-intensive garment and textile industry requires simple skills of workers who live from hand to mouth with their salary. If they are laid off, they have to seek other jobs to make a living even although they get a monthly aid of VND1.8 million from the Government. It is clear that garment and textile companies will lose more than 50% of their workforce. And, so when the market recovers, they will no longer be able to have enough personnel to recover production quickly.

For that reason, garment and textile companies do not choose the layoff plan but make all possible products on existing technology equipment, although salary is worse than when they make garment and textile products.

For Vinatex, priority is to pay more of the minimum wage to employees and Vinatex accepts incomplete depreciation and sacrifices administrative costs. We also quickly make what the market needs like medical protection equipment and face masks. We ensure employment for approximately 20% of its workforce.

We propose, firstly, to be exempted from social insurance and union dues from May to the end of December 2020 because this is a huge cost we have to pay while struggling with mountains of hardships.

Secondly, we ask for quick approval and preparation of guidelines for EVFTA enforcement to bring quick benefits to exporters. After the National Assembly adopts it, ministries need to issue directives and circulars to fulfil origin requirements to get tax cuts.

Huong Ly (Vietnam Business Forum)