Enterprises Increasingly Resilient to COVID-19 Pandemic

9:52:22 AM | 3/17/2021

According to the newly released the report on “the impact of the COVID-19 pandemic on business in Vietnam: Key findings from the 2020 business survey" by Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the World Bank, the COVID-19 pandemic has had a serious impact on businesses in Vietnam, with 87.2% of surveyed firms affected at the large level, with just 11% of enterprises "not affected by anything" and nearly 2% reported a "mostly positive" impact.

Enterprises operating for less than 3 years suffer the most

Most negatively affected include the enterprises, which have been in operation for less than three years; micro and small-sized enterprises (SMEs), and the enterprises in the Central Coast region. Both domestic private enterprises and foreign direct investment (FDI) enterprises were severely affected. Private enterprises in a number of industries have a high rate of negative impacts, including the ones in the Garment (97%), Information and Communications (96%) and the Manufacturing of Electrical Equipment (94%). FDI enterprises in a number of industries with a high rate of negative effects include Real Estate (100%), Information and Communications (97%), Agriculture/Fishery (95%).

Mr. Dau Anh Tuan, Director of the Legal Department of VCCI, said that the COVID-19 pandemic has made it difficult for businesses to approach customers or employ workers, and has disrupted supply chains and resulted in additional costs for COVID-19 prevention. Many businesses reported being interrupted, stopping working due to the pandemic, even on the verge of bankruptcy due to a sudden decrease in demand. Some said that they had to delay their investment progress, or even cancel ongoing or future projects.

Due to the effects of the COVID-19 pandemic, up to 65% of the private enterprises and 62% of the FDI enterprises experienced a decrease in revenue in 2020. The average decrease in revenue for private firms was 36%, and for FDI enterprises, 34%. The micro, small, and medium-sized firms had a higher average reduction in revenue than the large firms.

According to Mr. Jacques Morisset, Chief Economist of the World Bank in Vietnam, negatively affected by the pandemic, many businesses proved their high resilience after the ease of social distancing nationwide by the end of April 2020. They have adjusted their business models, especially by accelerating the application of digital technology and responding to the local customers' needs and reinforce their position in the global value chain. To sustain this transition, smart and effective support from the Government will be needed in both the short and long term.

Prioritizing enforcement capacity improvement

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry, said, “2021 remains a tough year for businesses. Authorities at all levels, besides supporting businesses, should develop and implement policies to support creating more favorable conditions for businesses to survive the post-COVID-19 pandemic, especially on innovation, training high-quality human resources to be ready for new competition. This will be very important to help businesses find new opportunities in the context of the economy and enter the development stage.

Specifically, according to Dr. Loc, the improvement of enforcement capacity should therefore be prioritized. In order to improve the implementation effectiveness, ministries, branches and local authorities need to strengthen the dissemination and propaganda of supporting policies to facilitate enterprises to access the support packages. In particular, it is necessary to have specific, detailed and comprehensive instructions on simple and easy-to-implement procedures for businesses.

Regarding the policies, Dr. Loc said that ministries, branches and local authorities need to actively figure out problems and shortcomings in the implementation process to recommend timely adjustments and appropriate support for businesses in each industry, sector and each period, particularly the ones in the industries that are severely affected by the COVID-19 pandemic. It is necessary to develop policies to develop industries and supporting services in the direction of less dependence on external sources, reducing the long-standing outwork situation, while also adding value and bringing a better position of Vietnam in global supply chains, creating more opportunities to benefit from the FTAs ​​that require a high content of domestic and intra-regional origin.

In addition, there should be policies to create more favorable conditions for Vietnamese private enterprises to survive and to be able to grow in the post-pandemic period, especially in terms of innovation and training of quality human resources.

In addition, relevant ministries and sectors need to study and propose the Government and the Prime Minister promulgate policy packages to support businesses to recover and expand business investment for the new period of 2021-2025. According to many forecasts, the COVID-19 pandemic will continue to cast a long shadow on the global scale and can only be completely eliminated after 4 -5 years, so in the coming time, there should be long-term policies. 

Finally, according to Dr. Loc, it is necessary to spread and replicate good models and practices in coping with the COVID-19 pandemic. Ministries, branches, and local governments should be responsive to the challenges through more effective business support policies. Business associations should share the lessons learned from businesses that have already survived the difficult context of the COVID-19 pandemic, particularly the experiences of selecting the market segments, partners, business relations, and investing in the core "internal forces" of the enterprise to increase resilience to shocks. With the discussions, the industries can come together to look back on what has happened and might happen in their industry, and discuss ways to strengthen cooperation and linkages to go forward in the future.

By Anh Mai, Vietnam Business Forum