Hanoi-based enterprises bear brunt of Covid-19, cry for support

Pressure from Covid-19 to enterprises like Manh Quang Co., Ltd is mounting, especially after the 17th Covid-19 patient of Vietnam was confirmed in Hanoi on March 6. The company’s CEO Nguyen Manh Quang was concerned his employees could quit on panic of the epidemic.

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“We have been severely affected by the disruption of raw materials supply from China because the factories there have no workers to operate,” Quang told Hanoitimes. “We can endure this situation for some more weeks but if it lasts for months, we would be broke.”

Many mechanical and manufacturing enterprises face obstacles due to the lack of inputs. Currently, Vietnamese manufacturers are reliant on Chinese suppliers for input materials, despite aggressive move by South Korean businesses to replace the Chinese ones. Moreover, as South Korean suppliers are also struggling with the impacts of the epidemic, they are unable to fill the gap left by the Chinese. 

Located in Tay Ho district, Hanoi, Vision Materials Vietnam Co., Ltd, imports most of its production inputs such as aluminum and accessories from China. Although they stockpiled a large amount of materials before Tet holidays, trade flow at sea and land bordergates with China remains limited due to the epidemic, resulting in input shortages. “If the disease progresses complicatedly, we could not avoid difficulties,” the company’s Managing Director Nguyen Quang Vinh told local media.

To cope with the situation, Manh Quang and Vision Materials Vietnam plan to buy inputs from Taiwan and Japan but at higher costs. “It is difficult for us to find new supply sources at this time, and our operational costs in mid-term would increase,” he said. “Manufacturing is different from other business. It could be more stable but if something wrong happens, it will take very long time to recover as it requires large investment and workforce.”

According to Hanoi Statistics Office, there were about 3,660 newly-established enterprises with registered capital of VND89 trillion (US$3.83 billion) in the first two months of 2020, up 2% in number and 198% in capital compared with the same period of last year. One company registered for establishment with a capital base of VND144 trillion (US$6.2 billion), but it turned out to be a “mistake” by the owners.

Data on the number of enterprises suspending operations and filing for bankruptcy in Hanoi in the first two months this year was not available.

In the whole country, in the period, the number of newly-established enterprises was 17,439 with total registered capital of VND364 trillion (US$15.7 billion), up 9.1% in number and 47.1% in capital compared with the same period of 2019. The number of newly established enterprises and registered capital continues to grow exponentially compared to the same period last year, according to the latest report by Ministry of Planning and Investment.

Urgent support policy needed

In the most positive scenario, Manh Quang’s business performance is forecast to reduce 10% compared to its plan for 2020 but with such the current situation, the pandemic affected the whole globe. “It is difficult to have a good scenario for this year. As such, the worst scenario for our company could be a 40-50% decline in revenue,” Quang said.

In such the context, the company’s strategy is to expand targeted markets, mainly in ASEAN and Japan in the long term. The company also defined to standardize the system meeting the quality management standards for the automobile manufacturing such as IATF16949, apply digital transformation, increase marketing activities to the exporting markets.

“Vietnamese consumers are tightening their belts, leading to lower purchase power. It is time to reduce value-added tax in order to stimulate consumption,” he recommended. The government should consider supporting enterprises to reduce logistics costs and environment tax on petrol.

Vinh recommended that in order to cope with the negative impacts of the disease, there should be policies to support businesses in terms of capital and taxes, especially the state inspection should be relaxed.

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Agreeing with Vinh, Quang from Manh Quang Co., Ltd suggested that the government needs to have timely support, reduce inspection this year, apply appropriate land rent fees and preferential interest rates for bank loans. “These policies are aimed at helping businesses to avoid bankruptcy, keep creating jobs, maintain social stability and generate revenues for the state coffers,” he said.

According to the Hanoi Association of Small and Medium Enterprises (Hanoisme), 50% of enterprises in manufacturing industries in Hanoi who rely 30-40% of inputs on imports will grow at zero percent in the second quarter of this year.

Production of equipment, machinery, smartphones and means of transportation categories will fall at least 20% each quarter if the epidemic lingers. In order to support businesses, Mac Quoc Anh, vice president of Hanoisme, said that preferential loans and interest rates for businesses are urgent because the impacts of epidemic on enterprises are huge. “It is necessary to promote the development of industrial clusters in order to have a land fund for businesses to expand production and business,” he proposed to the Hanoi Department of Planning and Investment.

Challenge is also the opportunity for Manh Quang, as this time is for his enterprise to improve itself through enhancing the training employees and workers. Shifting focus on the domestic market, increasing export portfolio, diversifying targeted customers and industries is the company’s strategy to reduce risks in the long term.