Businesses Struggle to Maintain Production

8:35:20 AM | 9/23/2021

Businesses are facing a lot of difficulties resulting from a sharp decline in aggregate demand that has caused a decrease in orders, contracts and output, a broad drop in revenue; and disruptions of manufacturing, consumption, and export supply chains, according to the Ministry of Planning and Investment.

Staggered by pandemic

Businesses and trade associations have sent requests to the Prime Minister, stating their difficulties in keeping production alive.

The Vietnam Association of Seafood Exporters and Producers (VASEP) has repeatedly warned about the fallout of the entire production chain of seafood farming - harvesting - processing - trading - importing and exporting.

According to VASEP, farms in Ca Mau, Soc Trang and Bac Lieu provinces are currently unable to export their products because of lockdowns. Fish and shrimp are oversized, which require more feed but bring cheaper selling prices than standard-sized ones.

Seafood processors are also just working in moderation. Over 50% of pangasius processors in the Mekong Delta and fish processors in the Southeast have closed. The so-called “three on the spot” manufacturing measure is only a temporary solution to continue operations for a short time. This measure cannot last more than one month.

They also have another existent concern, employment. Most workers are not vaccinated, and they may quit their jobs for fear of infection. Pham Thi Huan, Chairwoman of the Board of Directors of Ba Huan Joint Stock Company, even said, “If we are not vaccinated, we can only keep 40-50% of employees no matter how much salary we offer.”

Disruptions not only happen to the livestock industry but almost all production and business lines are congested with stockpiles. Without distribution, they will have to accept temporary shutdown, dissolution or bankruptcy.

Difficulties faced by enterprises are clearly shown in data released by the General Statistics Office (GSO). Only 81,600 enterprises were registered for establishment while bankruptcies reached 85,500 enterprises in the first eight months of the year. This was the first time in many years that comers were fewer than leavers.

Among leavers, up to 43,200 businesses temporarily suspended their operations because they could not afford the fight against COVID-19.

According to a report from the GSO, the Index of Industrial Production (IIP) in August sank 4.2% from the previous month and 7.4% from the same period of 2020. In particular, the processing and manufacturing sector, which is the growth engine for industry, plunged 9.2% this month. In the first eight months of 2021, IIP tumbled 5.6% year on year. Although the growth was higher than a year earlier (2.2%), it was much lower than the growth of 9.5% in the same period of 2019.

In the same period last year, total retail revenue dipped only 5.8%. This year, it fell 6.2% again on a sharp decline in purchasing power of the economy which will hurt business dynamics of enterprises.

Support measures for specific production in need

On a macro level, to overcome the above difficulties, it is necessary to address production and supply chain disruptions as soon as possible, according to experts. Currently, many localities are applying social distancing measures, even excessive measures to control freight distribution, which interrupt business operations mobility making it difficult for production and business.

The inflexible application of social distancing according to Directive 16, “three on the spot” and “one route, two destinations” models are causing great difficulties for businesses, both expenses and risks in controlling the pandemic, human health and living space because physical conditions for living and working in the pandemic time were not designed from the outset.

In the first eight months of 2021, only 81,600 enterprises registered for establishment, while 85,000 companies left the market.

Characteristically, the above models are just temporary to keep up production. It is necessary to quickly make every effort to contain the pandemic to resume normal production. This model has been successful in Bac Giang and Bac Ninh provinces. However, in the long run, this model places pressure on enterprises because expenses for these new models are higher than business as usual.

Meanwhile, if we continue to maintain production and supply commodities as we are doing now, production and supply chains will collapse and will be difficult to recover in a short time.

The world market is recovering from the pandemic, the demand for inputs and commodities is gradually increasing. If in a short time, domestic companies cannot revive to meet orders for international customers, Vietnam will face the risk of being excluded from international supply chains.

Source: Vietnam Business Forum