Vietnam warned of lagging behind in economic recovery

The serious Covid-19 situation and subsequent restrictive measures across 20 provinces/cities in Vietnam have taken a toll on the local business community as nearly 11,700 enterprises are forced to exit the market every month.

Production at MTEX Company. Photo: Cao Thang

Without drastic measures for aiding businesses, the economy would face an uphill task to stay on the same wavelength of recovery with their regional and international peers.

Such issue has been among major topics getting debated at the first session of the 15th National Assembly (NA) that was recently wrapped up.

During the hearing, Minister of Planning and Investment Nguyen Chi Dung informed that Vietnam currently has 870,000 enterprises, of which 97% are small and medium-size with low competitiveness and limited financial capabilities.

“Without new orders, many have been operating with no revenue, and even if that is not the case, the disrupted supply chains put them in a difficult situation to finish contracts on time,” Dung said.

For the first half of 2021, the number of enterprises leaving the market rose by 25% year-on-year, to 70,200, averaging 11,700 per month.

Chairman of the Vietnam Chamber of Commerce and Industry Vu Tien Loc noted except for those operating in fields of finance, banking, and insurance, the majority are fast becoming vulnerable.

“Many in aviation, tourism, transportation, and hospitality services are agonizing, and unless substantial supports are provided, there would barely survive to see the end of the pandemic,” Loc said.

According to Loc, measures tailor-made for small and micro enterprises are essential and the timing should be similar to “rescue a dying patient”.

Measures for enterprises to thrive, not survive

Taking a more specific view on such measures, Deputy Phan Duc Hieu from Thai Binh Province said while the government should expand current supports in terms of waiving and reducing fees and taxes, enterprises also need the resources to restructure operation and improve their corporate governance capabilities to not only survive but thrive.

“They should be equipped with the ability to absorb and take full advantage of the financial support provided,” Hieu said.

Hieu said in this context, enterprises that managed to adapt to the situation and with strong financial capabilities would get ahead of their competitors and gain market share.

On July 30, Deputy Prime Minister Le Minh Khai approved a proposal from the Ministry of Finance (MoF) for financial support worth VND24 trillion ($1 billion) for businesses affected by the pandemic.

This would be the second rescue package for the economy that is initiated by the new government, following a social package worth VND26 trillion ($1.13 billion) 15 days ago.

In April, the government issued Decree No.52 on extending the payment deadline for taxes and land rental fees until the end of 2021, estimated at around VND115 trillion ($5 billion).

At a hearing held by the NA on July 25, the MoF is proposing postponing the effective date of Circular No.40 which provides stricter guidelines on the payment of value-added tax, personal income tax, and tax administration for business households and business individuals, until January 1, 2022, instead of August 1, 2021.