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How are companies operating in Vietnam faring?

How are companies operating in Vietnam faring?

Tuesday 28, 09 2021
Used to be a much potential destination for FDI enterprises, Vietnam’s business is now in a difficult situation when the prolonged pandemic progression and social distancing create obstacles for international companies. Domestic enterprises do not fare well either.

Companies operating in Vietnam in hardship

According to the General Statistics Office, in the first eight months of 2021, Vietnam had 81,600 newly registered enterprises, however there were 85,500 that left the market. Thus, on average, nearly 10,700 businesses are leaving the market every month. The targets of the number of newly-established enterprises, the number of registered capital, and the number of employees in August all decreased sharply compared to the same period in 2020.

General Statistics Office

In particular, many businesses are facing the risk of bankruptcy, domestic and international supply chains are broken, laborers lose their jobs, farmers and fishermen cannot sell their products. Many laborers in the provinces have no jobs, no food, and no saving.

According to representatives of many associations, the percentage of businesses facing difficulties to the point of being unable to recover is very large, requiring strong solutions. Along with direct support through fiscal and monetary policies, it is extremely important to strengthen procedural reform, especially removing the troublesome procedures that popped up during the period of COVID-19 prevention and control.

In the past two months, the impact of the COVID-19 pandemic on the economy has caused a sharp decline in industrial production and trade. Industrial production in August decreased by 4.2% compared to the previous month and decreased by 7.4% over the same period last year. In the context that more than 85% of the export value comes from the processing industry, the industry's difficulties have led to significant consequences. Merchandise export turnover in August decreased by 6% from the previous month and by 5.4% over the same period last year. The trade deficit increased. The trade deficit of the past eight months of 2021 reached more than 3.71 billion USD.

Covid 19

The main reason is that the strict pandemic prevention and control methods have greatly affected the activities of companies, especially for small and medium enterprises (SMEs) and household businesses.

In dire need of clear directions

The newest survey carried out by the American Commerce Chamber (AmCham) in Vietnam showed that their members are in utter need of knowing about the plan for economic reopening and recovery.

Mary Tarnowka, Executive Director of AmCham, said that when the survey was conducted about three weeks prior, 13% of participants were companies that stopped production, and about 50% were operating at under 50% of capacity. 20% of survey respondents were in the manufacturing sector and stated that they have shifted some production activities to other countries, while 14% of the respondents were in discussions. Those numbers are almost certain to have increased by now.

Executive Director of AmCham

The director also emphasized that once a production line has to be moved, it can be difficult to go back to its previous state, especially when the production line is expanded in other areas. AmCham hope that the authorities would soon realize the necessity of a plan to reopen and recover the economy for companies operating in Vietnam.

“Vietnam benefits greatly as companies look to diversify their supply chains and reduce their reliance on China. But the current mixed signals, disruptions, and delays in controlling COVID-19 and reopening will limit this potential.” Mary Tarnowka added.

There need to be a clear route for reopening and sustainable development for business planning, people's welfare, and livelihoods. That includes facilitating the movement of goods and workers between provinces.

In a recent meeting, Minister of Planning and Investment Nguyen Chi Dung informed about the possibility that GDP for the whole year 2021 may only increase by about 3.5-4%, provided that the disease must be well controlled in September to soon transition to the new normal from the fourth quarter. At the same time, localities must ensure friendliness, companionship, willingness to remove and listen to businesses.

Despite many attempts to simplify administrative procedures, there have not been many breakthroughs or significant changes regarding said procedures. In the context that businesses have had a lot of difficulties because of the pandemic, reform solutions need to be made better, stronger, and more drastic.

 

Compiled by VietnamCredit

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