“Double Task” Requires Extraordinary Efforts of Business Community

The pandemic is a primary cause for business decline. In the first three months of 2020, Vietnam had nearly 35,000 businesses withdrawing from the market - an all time record. And for the first time in decades, the number of businesses leaving the market was greater than the number of newly registered ones.

Businesses face unprecedented hardships

According to a quick survey conducted by Vietnam Chamber of Commerce and Industry (VCCI) at the end of March and early April 2020, the impact of the pandemic on business operations was very serious. Nearly 85% of respondents said that the plague narrowed their consumption markets; nearly 60% said that the contagion caused them to run short of capital and disrupt cash flows for business; 40% said that the pandemic caused input shortages; 43% had to downsize their staff; 82% forecast that their 2020 revenue would fall against 2019. And up to 30% of businesses predicted a decline of 30-50% in revenue and 22% anticipated a drop of over 50%.

According to the survey, if the Covid-19 pandemic worsens, nearly 30% of companies could only operate for no more than three months, and 50% could survive half a year. Over 75% reported that they will have to cut staff and nearly 10% reduce their staff by 50%. Only less than 1% of respondents increased their labor force. This trend may leave millions of workers out of work in the coming months.

What have businesses done in this context? According to the survey, most enterprises have proactively adopted anti-pandemic measures at the workplace as recommended by the Ministry of Health and local governments, while trying their best to maintain business operations. The “double” task requires extraordinary efforts from the business community. 73% of businesses had timely support policies for their employees. Enterprises generally have been active and creative to introduce appropriate solutions for employees in time. More than 60% applied flexible working time to a part of the labor force; 46% did not conduct downsizing but reduced working hours; 42% spent this time training employees; and 41% allowed work from home. Only about 20% said they had to cut staff and terminated labor contracts and 21% had to reduce wages, not firing their employees. Those are flexible, responsible behaviors.

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said, it is impossible to know when the pandemic will end, but it is certain that its consequences and impacts on the economy will be lasting and cannot be healed immediately after the pandemic ends. Difficulties and hardship for businesses will continue in the immediate future.

Facilitating smooth circulation of commodities

Integrated opinions from the business community, the VCCI President sent Official Letter 0210/PTM-PTDN dated February 25, 2020 to the Prime Minister, reporting enterprises' difficulties, proposing long-term solutions and recommending 12 short-term urgent solutions to assist enterprises to get through this tough time.

In the face of the increasingly complicated development of the Covid-19 pandemic and the increasing difficulty against businesses, VCCI conducted a quick survey on business performance and, on April 3, 2020, the VCCI President held a meeting with leaders of nearly 100 domestic and foreign business associations to study the implementation of the Prime Minister's Directive, the new effects of Covid-19 pandemic on business operations and their suggestions and recommendations. Integrating opinions from business associations and enterprises, in addition to solutions launched by central and local authorities, VCCI President Loc sent another official dispatch to the Prime Minister to propose new solutions for business support.

Accordingly, except for a very limited number of sectors/fields that must be temporarily closed, it is necessary to encourage and facilitate merchandise production and circulation, with all pandemic prevention measures strictly applied, so that businesses can save themselves, continue operations, ensure jobs for workers, ensure social security and reduce burdens on State subsidies in the context of very tight state budget today. VCCI proposed the Government supplement and immediately announce the list of essential goods and services suitable to Covid-19 prevention and containment conditions to facilitate manufacturing and circulation of these goods and services for people, even in case tighter isolation and lockdown measures are applied.

In addition, the Ministry of Health is required to have clear scenarios or regulations for businesses, especially commercial centers, supermarkets and enterprises in industrial parks to handle and quarantine Covid-19 infected workers or customers to avoid having entire industrial parks or business locations locked down when it is not necessary to do so if good measures are taken.

Regarding fiscal policies, Dr. Loc proposed immediately suspending the payment of VAT, corporate income tax, personal income tax, social insurance and trade union dues, while waiting for specific policies because the process of instructing the execution of solutions under the Prime Minister's Directive at ministries and agencies is still slow. Enterprises may stop operating and go bankrupt before official policies are applied. These policies need to be applied to commercial banks because they are also corporate.

In addition to extending or delaying the payment of taxes, social insurance, charges and fees, VCCI proposed applying policies on exemption and reduction of these payables within the jurisdiction of the Government. It also asked the Government to submit measures on tax, fee and fiscal reduction to the National Assembly right at the beginning of the mid-year meeting within the jurisdiction of the National Assembly. It proposed extending, postponing and exempting land tax for businesses in the time of the pandemic, allowing the retrospective implementation of loan interest expenses when taxes in 2017 and 2018 are calculated (according to the draft amendment to Clause 3, Article 8 of Decree 20/2017/ND-CP on tax management for businesses with associated transactions).

At the same time, with the permission to carry forward losses for the next five years, VCCI proposed carrying out losses as a result of Covid-19 pandemic in 2020 to the profit in 2019. This will allow businesses to pay taxes within 2019-2020 and help them avoid bankruptcy if they had profit in 2019 but suffered loss in 2020 due to the Covid-19 pandemic.

Regarding credit policy, in addition to current solutions such as restructuring debts, reducing lending interest rates and reducing fees, enterprises are asking for a further reduction of 2-3% for new and existing loans (to about 4-5% for VND loans and 2-3% for USD loans). The State Bank of Vietnam was required to have instructions on standard processes for assessing damage and identifying supported entities because commercial banks are acting differently in practice.

Regarding labor, salary and trade union policies, VCCI proposed not adjusting the regional minimum wage for 2021, suspending employers and employees' contributions to union fund, social insurance, health insurance, and unemployment insurance in 2020. It recommended the Government ask the National Assembly to reduce unemployment insurance premiums from 1% to 0.5% and trade union payment rate from 2% to 1% in 2020.

Integration will be revised

According to Dr. Loc, not only during the pandemic but even after it, the biggest problem will be employment. The International Labor Organization (ILO) forecast that Covid-19 will cause 25 million people to be out of work. Many international organizations anticipated an even higher number. Economic restructuring and business model transformation after Covid-19 will deepen this trend. Digital transformation and robotics will surely be strengthened. Online transactions and the online economy will take the throne. The domestic market and the internal production network of the economies will be taken seriously. International trade and investment will be reversed - capital flows of developed economies tend to return to home countries. International investment will be more decentralized to disperse risks. The synergized impact of technology, trade war and Covid-19 will paint a global economic picture with new colors and shapes. Integration is still an important trend, but it will certainly be revamped with the spirit that not only promotes freedom but also needs to be more balanced and fairer.

“Vietnam's economy and business community will face unprecedented opportunities and challenges,” he said.

According to Mr. Loc, Vietnam will have the opportunity to receive new higher-quality capital flows in a decentralized investment strategy that aims to diversify supply sources to avoid excessive dependence on a market of transnational corporations. Vietnam has available advantages in terms of geography, geopolitics, market size and resources. But, in order to make good use of this opportunity, the country is facing requirements for improving institutional quality, human resources and infrastructure to get new investment flows. Challenges are also greater as the automation trend increases; career opportunities in labor-intensive industries will shrink. Employment for millions of skilled workers is low. It is a challenge to create jobs in garment-textile, leather-footwear and electronics industries - key job generators in the economy, even as millions of workers are being freed from low productivity agricultural areas. The mission of employment generation places this weight on the shoulders of the entrepreneur force.

By Quynh Anh, Vietnam Business Forum