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Vietnam: Four lockdowns within 18 months have hit businesses hard
In the last 18 months, lockdowns and social distancing have been imposed on four occasions. As a result, many enterprises have had to reinvest or restart business because of disrupted production chains during the social distancing periods.
The fourth wave of Covid-19 is different from the previous ones as it is a larger scale, with more infection sources. The cases are mostly community transmitted, and the virus has been spreading rapidly.
The number of cases in this wave is even higher than the total cases of the three previous waves combined. The number of isolation areas is also higher than that in the second and third waves.
Serious impact
Tourism and passenger transport have been once again dealt a strong blow. Production and trading enterprises have also suffered heavily.
The General Statistics Office (GSO) reported that 59,820 businesses left the market in the first five months of the year, an increase of 23 percent over the same period last year. Meanwhile, only 55,800 new businesses were set up.
Most of the businesses that had to suspend operation or were dissolved were ones established less than five years ago, with a small scale.
However, experts pointed out that the pandemic has also been affecting medium-scale and long-lasting enterprises.
As many as 189 enterprises with capital of more than VND100 billion had to suspend operation in the first five months, up by 44.3 percent, the sharpest increase among the groups of enterprises leaving the market.
More than 6,800 enterprises operating for more than 10 years reported suspension. The number of businesses expected to shut down is predicted to continue rising in the upcoming months.
Many enterprises reported a sharp fall in revenue in May. A mechanical engineering company in Cu Chi District, HCM City, said its main products, spare parts for trucks, have not sold well because of the sharp fall in truck demand. Its May revenue was just 50 percent of April’s. The enterprise is pessimistic about its production and business performance in June.
Many enterprises complain that every time when a new outbreak occurs, lockdown and social distancing are imposed. The four social distancing periods in the last 18 months have had a serious impact.
Labor management agencies have not released updated figures, but GSO reported that in the first quarter, Covid-19 had a negative impact on 9.1 million people aged from 15 and above.
Of this number, 540,000 workers lost jobs, and millions of workers had decreased incomes.
Many enterprises in Bac Ninh and Bac Giang provinces, the Covid epicenters, had to halt production because of the high number of infections in the industrial zones there.
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| Vietnam saw an excess of imports over exports last May and experts predict that a trade deficit may continue in the months to come. The growth rates in the second quarter and the first half of 2021 will be lower than initially planned. |
In Hanoi, HCM City, Da Nang and Vinh Phuc, some areas have been isolated, and non-essential business activities have had to stop temporarily, affecting millions of workers.
Growth rate
Experts have predicted that industrial production output will decrease because of production suspension and downsizing.
This means that the industrial output growth rate, especially in the processing industry, will drop, thus leading to a fall in export turnover, especially export of manufacturing and processing products.
Vietnam saw an excess of imports over exports last May and experts predict that a trade deficit may continue in the months to come. The growth rates in the second quarter and the first half of 2021 will be lower than initially planned.
The economic recovery is being affected by the fourth wave, so additional measures are needed to stamp out the virus.
Experts believe that only when Vietnam can vaccinate the majority of people will society become safe for production and business resumption. So, it is necessary to solve the vaccine problem now.
Dr Nguyen Dinh Cung, former Head of the Central Institute of Economics Management (CIEM), a respected economist, said in 2021, public investment still needs to act as the pillar for growth.
However, according to GSO, the disbursement of public investment funds by the end of May was only 28.7 percent of the plan for 2021. So it is necessary to speed up disbursement for important projects so as to boost production and business.
The Government has been advised to stimulate domestic demand by applying a more reasonable fiscal policy, and increase support for affected people and businesses. Lending interest rates need to be reduced to support pandemic-hit businesses, especially in the fields of tourism, transport and services.
Taxes and fees should not be increased in 2021. And recalculating tax remissions for businesses also should be done. Business owners are suffering heavily. They don’t know what to do and where to go to get support.
The corporate income tax exemption and reduction have proven to be insignificant to businesses, because most of them are operating at a moderate level and their profits are modest.
Experts have suggested reducing the VAT (value added tax) to help stimulate domestic demand, thus promoting production and business.
Tran Thuy
Source: https://vietnamnet.vn/en/feature/four-lockdowns-within-18-months-have-hit-businesses-hard-744678.html