Hardships Cannot Dampen Businesses

5:27:19 AM | 2/8/2021

With a large exposure and deeper international integration, the Vietnamese economy finds a lot of opportunities but it has also suffered from many negative market impacts, especially the COVID-19 pandemic. Manufacturing, supply, circulation, trade, labor and employment have been delayed or disrupted. However, the Vietnamese business community has quickly adapted to this situation. Mr. Hoang Quang Phong, Vice President of VCCI granted Vietnam Business Forum’s reporter an exclusive interview on this issue. Anh Mai reports.

Despite being hit hard by the pandemic, having supply chains disrupted and confronting market turmoil, Vietnamese businesses can still see opportunities for growth. Could you please tell us some remarkable successes of this effort as well as its potential in the coming time?

Enterprises were heavily affected in the past year. Many had to suspend operations, some even went bankrupt, dissolved, or scaled down operations. In 2020, as many as 101,700 enterprises suspended their business for a definite period, ended operations and waited for dissolution procedures, or completed dissolution procedures, an increase of 13.9% over the previous year. Among them, 46,600 enterprises temporarily ceased their business, up 62.2%; nearly 37,700 stopped operations and waited for dissolution procedures, down 13.8%; and nearly 17,500 completed dissolution procedures, up 3.7%. On average, nearly 8,500 companies left the market each month.

Due to the COVID-19 epidemic, the Vietnamese business community took various measures to maintain business operations such as promoting e-commerce and digital economy, changing key products and services, and actively looking for new markets for input materials and for output products. As a result, in 2020, the country had 134,900 new enterprises which registered to invest a total of more than VND2,235.6 trillion and hired 1,043,000 workers, down 2.3% in enterprises, up 29.2% in registered value and down 16.9% in employees from the previous year. In addition, 44,100 companies resumed operations, up 11.9% over 2019, bringing the number of new active companies in 2020 to 179,000, up 0.8% year on year. On average, 14,900 companies were established and resumed operations each month.

Successful epidemic control made Vietnam a reliable destination for foreign investors, a potential and safe destination for reallocated investment flows in the world, especially the trend of moving manufacturing facilities out of neighboring markets to Vietnam by world-leading corporations. With an abundant workforce, reasonable labor costs, a good infrastructure and a favorable geographical location, Vietnam has caught the attention of corporations seeking to shift their investment choices.

Perhaps, the COVID-19 epidemic time was also an opportunity for enterprises to conduct restructuring and improve their resilience as well as their adaptability to the new situation. They can self-assess their actual business performances, strengths and weaknesses and competitive advantages as well. Then, they can make their business models more efficient and sustainable. The impact of the COVID-19 epidemic also resulted in changes in demand for products and services and provided opportunities for Vietnamese firms to enter new markets alongside traditional markets. In particular, Vietnam's international integration policies, especially advantages from new generation trade agreements such as CPTPP, EVFTA, UKFTA and RCEP will enable them to more deeply join value chains, form new value chains and create new momentum.

The year 2020 was seen as a really difficult year and a "test" for the business community. This was also a time for many to self-assess their performance to sharpen their competitive edge. How do you view this issue?

Increased pressures on competition and survival, combined with economic shocks caused by COVID-19, rocked many enterprises, let alone delaying trade promotion and investment. Many businesses had to suspend operations and shrink production, especially small and medium-sized enterprises (SMEs). Some had to spend their savings, previously intended for development investment, for wages.

Despite being affected by the epidemic, this is also an opportunity for businesses to refresh themselves and find new directions to survive and grow stronger in the market. COVID-19 impacts changed perceptions and trends in consumer tastes and new commercial transactions, based on remote, contactless principles; and unveiled new online businesses based on digital economy. This changed demand for some essential products and services such as food processing, medicine, digital transformation and e-logistics. At the same time, it will bring new market opportunities for Vietnamese enterprises to restructure production, form new value chains and make breakthrough development.

This is an opportunity for Vietnamese businesses to recognize and test their true capacity, resilience and adaptation to market events and nontraditional security; review, evaluate, restructure input sources and customers and find new directions; build production restructuring plans and new business strategies to quickly grasp new market signals and demands. In this tough time, many businesses focused on renovating equipment and technology at cheaper costs; fostered domestic supply linkages and networks, reduced dependence on foreign countries, raised quality and lowered product and service prices to increase their market share. Some international integration policies such as newly signed and officially effective free trade agreements also create advantages for Vietnamese enterprises to participate in global value chains.

Moreover, many initiatives were implemented to address negative epidemic effects such as applying flexible working hours to maintain jobs for the market and workers, slashing production costs, and searching for alternative input sources. In particular, actively looking for markets for products, expanding the domestic market, seizing new business opportunities, and applying digital technology to production and business are quick solutions for businesses. These bases are believed to strongly revive Vietnam's economy in general and businesses in particular the coming time.

In addition to the efforts to expand production and business activity, employment is also a "hot" issue faced by businesses in recent years. Would you be kind enough to tell us impacts on employees and businesses? What actions and solutions has VCCI taken to support the business community?

In fact, temporary and short-term workers, especially female workers, are most vulnerable to cost-cutting measures adopted by enterprises. Many businesses had to lay off workers and terminate labor contracts to match their restructuring plans for survival.

Right after the outbreak of the pandemic in early 2020, VCCI studied its impacts on businesses and workers. In general, businesses had timely support policies for their workers in crisis, and actively and creatively proposed timely appropriate employment solutions. They also took this chance to retrain their employees or organize to work from home. These were flexible and responsible behaviors.

VCCI also proposed to the Government a series of short-term and long-term solutions. Out of 36 short-term solutions, five are about coordinating implementing epidemic prevention measures and business continuation; five about fiscal policy; three about credit policy; five about labor, salary and trade union policy; two about support for sectors severely hit by the COVID-19 epidemic; three about administrative procedure reform; five about implementation of the Government's directives and resolutions; two about joint effort and action of workers and consumers; and six about the business community. Many of VCCI's recommendations were considered and applied in a series of Government solutions on support for businesses and employees in the past time.

However, importantly, employment is the biggest issue, not only during but also after the COVID-19 pandemic. The International Labor Organization predicted that COVID-19 would leave 25 million people out of jobs. Many international organizations put up even higher numbers. Restructuring the economy and transforming the business model after COVID-19 will deepen this trend.

Currently, digital transformation and robotization trends are being accelerated and online transactions and the online economy are taking the throne. Domestic market and internal production networks of the economy will be considered, international trade and investment will reverse their directions, with investment capital flows of developed economies tending to return to home. International investment will be more decentralized to disperse risk.

Vietnam's economy and business community will face unprecedented opportunities and challenges. Vietnam will have the opportunity to receive new, higher quality capital flows in a decentralized investment strategy and multilateralizing the supply source to avoid being too dependent on a market of transnational corporations. Given its advantages of geo-economy, politics, market size and resources, Vietnam has many opportunities to welcome new investment flows. But, this development will also couple with challenges as accelerating automation will take job opportunities in simple labor-intensive industries like textile and garment, leather and footwear, electronics and seafood - main job creation engines of the economy, as millions of workers are leaving low-yield agriculture. Generating jobs for these people will be a big challenge in the coming time. Indeed, employment weighs heavily on the shoulders of Vietnamese businesspeople.

Therefore, improving competitiveness and management skills, seeking and using diverse markets, applying advanced technology and enhancing skills for employees are important conditions for businesses to move forward in the integration era. Synchronously reforming economic institutions and effectively using support packages, infrastructure and human resources to lay the foundation for business development will be the most important requirement that opens the way for the development of Vietnamese economy and business community in the future.

Source: Vietnam Business Forum