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Thousands of businesses left the market due to Covid-19

Wednesday 11, 03 2020
In the first 2 months of the year, more than 28,000 enterprises left the market.
Thousands of businesses left the market due to Covid-19

Analysts predict that with the Covid-19 epidemic affecting most industries, the number of businesses leaving the market will surely continue to rise if the support policies are not timely made and implemented.

More businesses stopped operation than newly established

The report of the Business Registration Authority showed that, in the first 2 months of this year, there were 28,344 businesses withdrawing from the market while the number of businesses established in this period was nearly 17,400. Businesses which had to exit the market are not necessarily affected by the Covid-19 epidemic.

According to economic expert Pham Chi Lan, even if the Covid-19 epidemic had not yet spread globally, domestic enterprises would have also encountered many difficulties and been vulnerable due to their small size and low improvability.

Small businesses have to leave the market when there is a change in policy or external impact. In the first months of 2020, the outbreak of the global Covid-19 epidemic has negatively affected the global supply chain, whereby businesses in all business sectors, especially small & medium businesses, were impacted immediately. The disruption of business activities of tourism companies, motels, hotels, souvenir shops, retail stores, trade centers ... in recent times has partly reflected the difficulties that businesses have faced.

Small businesses have limited capital and finance, few backup resources, and no preparation for difficult circumstances. Pham Chi Lan said that small businesses are closer to the risk of bankruptcy when facing the challenge caused by the disease if they are not supported immediately.

According to the statistics of the real estate brokerage association, more than 300 real estate exchanges (accounting for one-third of the total number of exchanges in the market) have been closed recently due to the impact of the Covid-19 epidemic. A series of small hotels and motels across the country have temporarily stopped operating due to the absence of customers. Many private preschools have not earned income due to students staying at home, etc.

The Covid-19 epidemic has had a huge impact on the education industry and threatened both economic and social development in the future. Specifically, if the epidemic lasts for up to 6 months, 80% of the non-public educational institutions surveyed will experience a decrease in sales of over 50%, and 90% of which are at risk of bankruptcy due to unbalanced revenue and expenditure.

“We are financially, energetically and willingly exhausted” is the cry of 150 non-public educational institutions in their petition for the support for non-public educational institutions across the country to overcome difficulties caused by the Covid-19 epidemic submitted to the Prime Minister on March 3.

Thousands of businesses left the market due to Covid-19

Education is only one of the sectors heavily influenced by Covid-19. A survey of the Private Economic Development Research Board (Board IV) on 1,200 enterprises operating in different fields showed that, if the disease lasts for 6 months, nearly 74% of businesses are at risk of bankruptcy because revenue cannot cover operating costs, wages for employees, bank loan interests, business premises and other expenses.

In particular, the proportion of enterprises with turnover reduced by 50% due to the epidemic impact accounted for more than 60%, by 20-50% accounted for nearly 29%. Sectors that are severely and immediately affected, according to the survey results, are tourism (accommodation, hotels, catering), education, textiles, footwear, furniture manufacturing, etc.

Notably, about 20% of businesses participating in the survey said that "there is no solution to the disease". This fact shows the passiveness of businesses, but also reflects the limited capacity of small and medium-sized enterprises, and is also an early warning indicator for the crisis that may occur after the epidemic.

Ms. Pham Chi Lan also said that not only small businesses but also medium and large businesses will also be affected if the epidemic lasts for 6 months. According to Ms. Lan, raw materials of some garment and footwear businesses can only serve production until the end of March or next month.

Most of the raw materials are imported from China, so if the epidemic does not end before this time, the production of these businesses will face many difficulties. "Once importers divert orders to other markets, it will be very difficult for Vietnamese enterprises because they will lose these customers" Lan said.

Timely and effective support is needed

In addition to saving themselves, businesses have requested the Government to have policies to support them, such as reducing corporate income tax, VAT, interest exemption with late payment tax, etc. The government also needs to support preferential loans for businesses, and reduce interest rates on loans, freeze debts, and extend repayment periods.

In addition, businesses also expect the Government to implement stimulus packages, open the border gate for importing raw materials, reducing electricity and water prices, etc. Ms. Pham Chi Lan said that if the epidemic lasted for another 3 months, the situation would be extremely difficult for many businesses because the backup financial resources were exhausted.

The Prime Minister has just issued an urgent Directive to remove difficulties in production and business activities, ensuring social security in response to Covid-19 epidemic. In particular, the credit support, tax exemption and reduction package for businesses is worth up to VND 280,000 billion.

Specifically, the government will deploy a credit support package of about VND 250,000 billion on the basis of fully and promptly meeting the capital needs for production and business, shortening the time for loan application approval; rescheduling loan repayment, considering interest rate reduction and exemption, keeping debt group, fee reduction, etc.

The VND 30,000 billion support package will focus on exemption, reduction of taxes, fees, etc. This is an important and necessary move in the context of the socio-economic situation being seriously affected by the epidemic.

According to Ms. Lan, in the current context, using financial tools to support affected businesses and people is a must-do and must be implemented quickly in order to bring about effective results. The task of formulating policies and implementing this directive rests with the ministries.

Ms. Lan believes that from the lessons learned from the implementation of the USD 1 billion interest rate subsidy package in 2008-2009, ministries and agencies will identify the right subjects and businesses that need support to boost growth, rather than subsidize real estate speculators.

​>>  Bloomberg: 4 gloomy scenarios for the global economy because of Covid-19

Source: thesaigontimes

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