Working together to Address Post-Pandemic Challenges

Vietnam Business Forum would like to quote the recommendations by international associations, organizations and businesses on how Vietnam can respond to the Covid-19 pandemic to help the country’s economy gain back its full potential in the fastest and most sustainable way.

Mr. Francois Painchaud, IMF Resident Representative for Vietnam and Lao PDR 

Covid-19 has inflicted tragic human cost and a severe blow to global economic activity. For 2020, the world economy is expected to contract sharply by 3.0%, with significant downside risks to the outlook. This is much worse than during the Global Financial Crisis and the Asian Financial Crisis. Almost 90% of the world, 170 countries, will be worse off with lower per capita income at the end of 2020. However, as the pandemic fades and containment measures are lifted, the global economy is projected to grow by 5.8% in 2021, helped by policy support.

Vietnam had a remarkable response to Covid-19. Timely and robust measures have contained the spread of the virus domestically. Economic and financial policies have also been implemented to help the Vietnamese economy. The SBV has maintained abundant liquidity, eased monetary policy, and encouraged banks to show flexibility to borrowers affected by Covid-19. The Government has introduced fiscal measures to help businesses, the poor and self-employed affected by Covid-19. It is also scaling-up public investment to support economic activity, which should be accompanied by improvements in public financial management.

Despite its policy response, Vietnam has not been immune to the economic impact of Covid-19. Vietnam’s growth is expected to slow from about 7.0% in 2018-19 to 2.7% in 2020, reflecting both weak external and domestic demand and the impact of strict containment measures, which have now been lifted. Growth is expected to gradually pick up, reaching 7.0% in 2021, supported by government policies, Vietnam’s macroeconomic fundamentals and the global recovery. Additional government support may be necessary to protect the most vulnerable and prevent long-lasting economic damage, if downside risks materialize.

SMEs could be hit particularly hard by Covid-19. They are estimated to contribute 42% of output in Vietnam but more than 80% of employment. They are thus critical to secure a sustained and inclusive recovery. Prior to Covid-19, SMEs were typically less leveraged and productive than larger firms but had lower liquidity buffers. Covid-19 has hit hard in some sectors where SMEs are very active (e.g. services) and falling profitability could exacerbate liquidity pressures. Here, measures introduced by the Government and the SBV will help viable businesses, including SMEs, navigate through the crisis. Further unlocking access to finance for viable SMEs would help, including via fintech. A comprehensive approach for debt resolution and restructuring should be developed, including a simple and flexible insolvency regime.

Robust and inclusive medium-term growth will require structural reforms to boost productivity. Economic duality remains high in Vietnam with FDI firms much more productive than non-FDI firms, including SMEs. To help secure robust inclusive growth and reduce duality, Vietnam needs to improve its institutions, property rights, competition, corporate governance, infrastructure and connectivity; strengthen labor skills to meet businesses’ needs; and further reduce corruption, non-tariff barriers and the regulatory burden. Reforms along these lines would help all Vietnamese firms and should be supplemented by policies to facilitate technology spillovers, and the development of linkages between FDI and domestic suppliers. It would also be important that resources (land, financing, and labor) are freed from less productive SOEs for more efficient use, for example, by productive SMEs with growth potential.

Policies to support the recovery should encourage a greener, smarter and fairer world, including in Vietnam. Vietnam can undertake public investment and introduce incentives to support low-carbon and climate-resilient growth while promoting a job-rich recovery. The digital economy was resilient during the crisis and the digital divide should not be allowed to widen and leave behind communities. There is also an opportunity to build fairer societies by investing in people through better schools and training and expanding social programs.

Mr. SHIMIZU Akira, Chief Representative of JICA Vietnam Office

My first assignment at the JICA Vietnam Office was 10 years ago, from March 2010 until February 2014, and this return is my second assignment in Vietnam. When I first arrived in Vietnam, I was overwhelmed by crowded streets with lots of people and the noise of motorcycle horns, but at the same time, I also felt the people’s energy, which seemed to be saying: “Today is better than yesterday and tomorrow must be better than today”. Just as I felt, Vietnam has made remarkable progress in socio-economic development and various other aspects.

For many years, JICA has been making its best efforts to contribute to the development of Vietnam and to strengthening the bilateral ties between Vietnam and Japan through cooperation schemes such as: Technical Cooperation, provision of ODA loans and Grant Aid. For sustainable development of Vietnam in the future, JICA’s support for infrastructure development remains as important as ever.

Meanwhile, to enhance the sustainable and strong bilateral relationship between Vietnam and Japan, human resource development projects, as well as collaboration with Japan’s local governments and NGOs are also essential. Also, we will continue to work on expanding the development projects by utilizing Japanese companies’ knowledge. Moreover, on the basis of the ties my predecessor Mr. Konaka and former Chief Representatives have built, I would like to further strengthen a robust and good relationship with Vietnam.

On the other hand, on the occasion of this second assignment, I discovered a new aspect of this country. Until now, Vietnam has reported no deaths from Covid-19, and has successfully contained community transmission. It seems to me that people are very calm even under social distancing measures. I have been wondering how they have managed to respond to this new threat and where the calmness of these people comes from, and I felt the immense power of the people in this country.

I myself, working under the organization which is implementing international cooperation, have been considering each country, Japan and Vietnam, as partners and working with a focus on building the relationship between the two countries through ODA. But through the situation I experienced this time, I began to think that I myself need to learn from our partner country more than ever, and work together to tackle the challenges of the new post-corona world.

Though we have to wait for a while to overcome the influence of Covid-19, I strongly believe that in the near future, we all will be involved in the dynamic social changes of this country.

Mr. Koen Soenens, General Sales & Marketing Director, DEEP C Industrial Zones

The pandemic has raised serious concern over concentrating all manufacturing capabilities in one single market and created the huge urge for companies to diversify their operations. Being a Covid-19 success story itself, Vietnam has become a safe and sound destination for foreign capital to flow in. 

It is now going into the stage of gradual economic recovery and the new influx of foreign direct investment is expected to help it build the necessary momentum for a swift and decisive rebound.

Vietnam needs to take actions because it is not every day that we are given such a great opportunity. I see some aspects that Vietnam can make improvements on.

With the EVFTA coming into force, Vietnam should come up with an appropriate national action plan to make the most of this important pact, and raise the quality of FDI projects that it will take in. At the same time, Vietnam needs to enhance its ease of doing business by continuing to perfect the legal system and administrative procedures. Actually, Vietnam is making progress in this aspect with the recent digital transformation in public administration, but it needs to be done more thoroughly.

As the demand for industrial real estate is rising rapidly with companies exiting China, Vietnam should also guarantee the sufficient supply of ready properties and completed modern infrastructure connecting properties with ports. After all, one of the most important factors for manufacturers is getting the raw materials in and products out of the factory.

Mr. Steven Nguyen, Criteo's Senior Regional Manager for Southeast Asia

In Vietnam, online retail remains strong compared to the same period in 2019, however, recently it is getting close to what we have observed in 2019. As for the rest of Southeast Asia, online retail keeps growing - as based on our data on the impact of Covid-19 in Asia-Pacific, online retail sales in Southeast Asia are experiencing a higher uplift this year compared to 2019, with the highest sales uplift seen in the week of May 3 at 106%.

We see the increase in online shopping in Southeast Asia spanning various product categories, from health and beauty to consumer electronics, food and beverage to biometric monitors.

The global health crisis continues to affect countries, and measures like social distancing and travel restrictions limit people’s activities and movements, it is quite inevitable that their daily needs and routines have changed as well.

In Vietnam, 76% of the survey respondents said they plan to do more online purchases compared to their usual – while only 15% and 9% of respondents said they will do the same amount of shopping or shop less, respectively. 62% and 50% of the Vietnamese survey respondents also said they will be doing more online purchases of groceries and beauty/personal hygiene products.

As more and more consumers turn to e-commerce to shop for essentials and beyond, retailers now have to leverage their in-store brand equity and be able to present their offerings online in different ways to get engagement that brands must establish strong relationships with their clientele offline and on.

With online stores now the destination of consumers, retailers should also rethink the customer experience via more engaging campaigns that will not only draw loyal customers but create new ones.

Brands can think of creating programs that will help customers build long-term relationships with their own online shopping channel or application. These can include running app retargeting campaigns for high-demand products and features that the app offers, or loyalty programs and incentives for top engaged users.

And as consumers also face their new normal, retailers must ensure that their own efforts to promote their products remain sensitive to their consumers’ current situation.

Dr. Su Ngoc Khuong, Senior Director, Savills Vietnam

Facing severe impacts of the Covid-19 pandemic on a global scale and on every corner of daily life, the retail industry is struggling with numerous challenges and difficulties, especially for supermarkets or commercial centers.

The market has witnessed the farewell or closure of branches of many big retailers such as Auchan, Parkson and Big C. This failure may come from many different factors like changed buyer tastes, market competition amid the advent of many new trendy shopping centers with attractive tenants/brands. In addition, the rigidity of development strategies has left investors and operators of shopping malls behind and reduced competitive advantages against other competitors should be also taken into account.

Popular fashion brands have focused on both online and traditional stores, but there is an undeniable outcome that the upmarket fashion sector (high-end, mid-range, brands) still make 70-80% of total sales from physical locations.

Except for some other industries that are thoroughly utilizing and optimizing online channels such as using applications and online ordering systems, fashion brands still have to balance online and offline channels to maximize profits when physical sales channel is still dominant. And this is an opportunity for department stores and retail supermarkets to survive and develop, especially in high-end and mid-range product lines.

As the Covid-19 epidemic is still deeply affecting all aspects of life, in the retail segment, most shopping centers and retail supermarkets are reducing rentals by 30-100% for tenants. If Covid-19 lasts longer worldwide, for example three months longer, many brands will go into bankruptcy and abandon their retail spaces as a result. And, retailers may face bankruptcy if their financial capacity is not stable. Except for some industries that can take advantage of this pandemic for development such as professional health care, essential products, supermarket delivery services, and affordable foods, the rest are struggling to survive.

The question is how long and what strategies retailers and companies take to overcome this tough period. Business strategies are a core factor to the success of trade center developers. Their strategies include business planning, brand positioning, tenant positioning, marketing mix tools and product diversification. Besides, companies should combine and strengthen online sales to have good revenue and operational costs in Vietnam market.

Mr. Ngo Huu Tiep, Chairman of Giza Engineering and Construction Joint Stock Company

Giza Engineering and Construction Joint Stock Company is an industrial general contractor, specializing in the design and construction of factory projects in industrial parks, export processing zones. Our market segment is FDI projects, so when trade was restricted, social isolation was enforced, our business was hard hit.

Accordingly, as the pandemic has prevented foreign investors from entering Vietnam during the first half of 2020, new investment projects have been stalled. The progress of construction works have also been affected due to limited traffic, harder recruiting workers; many subcontractors have declared dissolution as they could not survive.

Regarding solutions to support businesses, in my opinion, the guidelines and solutions to support enterprises of the Government, ministries and agencies have been issued very timely in the recent time, initially put into practice. These solutions have actively supported business community to overcome difficulties, stabilize production and business.

However, in the coming time, it is expected that the Government will continue to have more practical policies and measures to create favorable conditions for businesses to access capital sources, extend loans and reduce interest rates to ensure production and business. In addition, businesses are also waiting for solutions to improve the investment environment to attract more investors and large FDI corporations to Vietnam in order to catch the wave of investment movement from other countries to Vietnam.

In addition to the support from the Government, in the new normal state, enterprises must clearly identify the groups of solutions to overcome the Covid-19 challenges. Especially, they need to take advantage of capital incentives under the State’s policies to be ready to break out with new opportunities.

Source: Vietnam Business Forum