Additional Government support needed amid rising production

Given massive woes due to the health crisis causing major disruptions in supply chains but amid a rise in local industrial production, the government has ordered radical amendments and changes in legal regulations in favour of enterprises, in addition to a required boost in vaccination nationwide, in a bid to improve the health of enterprises, which are a key economic growth pillar.

The business community is in critical need of further support from the government to stay afloat and develop.
The business community is in critical need of further support from the government to stay afloat and develop.

The Government Office has just released a document highlighting the Prime Minister’s direction on reviewing, revising, and supplementing legal regulations that have been obstructing enterprises’ business and investment activities.

As per request by Party General Secretary Nguyen Phu Trong in his closing speech at the third session of the 13th Party Central Committee and by the government’s Resolution No.66/NQ-CP dated July 1, 2021, on a specialised meeting on law construction, Prime Minister Pham Minh Chinh has ordered leaders of cities and provinces under the central rule to immediately review all shortcomings and mistakes in legal documents including laws, ordinances, decrees, circulars, and the prime minister’s decisions which relate to activities about investment, production, and business activities, land, planning, public asset management, and taxes.

The leaders have also been asked by the prime ministers to promptly propose solutions to the shortcomings, so that all the legal documents can be implemented in a manner quite favourable to firms.

All related reports must be submitted to the Government Office before July 20, 2021, so that the office can timely collect the reports and then report to the prime minister.

In addition, over the past few weeks, PM Chinh has also assigned the Ministry of Science and Technology to coordinate the research and production of COVID-19 vaccines within the national product development programme by 2030 amid complicated developments of the pandemic nationwide. He also asked authorised agencies and the Ministry of Health to negotiate and import more vaccines.

Last Saturday, the government launched Vietnam’s biggest vaccination campaign ever in Hanoi.

“Vaccine is considered the most effective measure to contain the COVID-19 pandemic and the Party and the state are determined to implement the Vaccine Strategy,” PM Chinh stated.

The strategy’s prime target is to give free annual injections to the people to achieve herd immunity. Vietnam must be able to have enough vaccines for the population from imported sources and domestic production. As many as 75 million people will be injected with 150 million does within the second half of this year and early next year.

In need of support

The Prime Minister’s strong moves have come amid enterprises feeling weaker in the aftermath of the COVID-19 pandemic which has been raging in Vietnam, causing disruptions in supply chains and employment.

The EuroCham Chamber of Commerce in Vietnam (EuroCham) has just released its Business Climate Index (BCI), with results demonstrating that the fourth wave of the coronavirus in Vietnam has dented the confidence of European business leaders.

According to EuroCham, before the fourth wave struck, the BCI had almost climbed back to pre-pandemic levels, reaching 73.9 in the first quarter. However, this latest outbreak and the spread of new variants have seen the index fall almost 30 points in quarter two to 45.8. This is a significant drop, though not as steep as during the first outbreak of the pandemic in 2020.
The fourth wave has also led to increased pessimism about the short-term outlook of Vietnam’s business environment. Just 19% of respondents believe that the economy will stabilise and improve in the next quarter. This figure is down from 61% in the first quarter.

“The EuroCham BCI reaffirms the urgent need for Vietnam to accelerate vaccinations. Local lockdowns, social distancing, and travel restrictions are not permanent solutions and will cause significant economic harm over the long-term, as our data shows,” said EuroCham chairman Alain Cany.

“There is no route out of this fourth wave without an ambitious and accelerated mass vaccination program that will enable normal life to resume. European companies are prepared to cover the cost of protecting their own staff – this will help to speed up vaccination while also reducing the financial and administrative burden on the state. But we need access to sufficient supplies,” Cany said.

The BCI also showed the urgent need for Vietnam to roll out a mass vaccination program. About 58% of respondents predict that their companies would see a significant, negative impact if their staff could not be vaccinated in 2021. Meanwhile, 44% of surveyed firms have not been approached to prepare for vaccination.

According to a recent survey by the American Chamber of Commerce in Hanoi (AmCham), the biggest challenges are the lack of available vaccines to protect their team members, and not being able to bring necessary people here due to burdensome travel requirements and paperwork.

Over 70% of respondents say their company is currently restricting work travel in Vietnam. Around 90% of AmCham members have cancelled work or personal travel due to COVID-19.

“The health and safety of people in Vietnam should remain the government’s number one priority. At the same time, it is important to recognise that in-bound travel brings in the necessary foreign experts and business people to facilitate new investment, efficient operations, key infrastructure, education of Vietnamese children, and more,” said AmCham’s executive director Adam Sitkoff.

Survey results also found that 81% of AmCham members said their company would bring more people to Vietnam if the mandatory quarantine period was reduced from 21 days down to seven days. The pandemic is likely to continue causing disruption and locking people inside a room for many weeks might seem like a good idea today, but Vietnamese policymakers need to think seriously about a safe and simple system of documentation that will facilitate international arrivals here. Vaccines have proven safe and effective.

“AmCham encourage authorities to implement less burdensome entry procedures for fully vaccinated businesspeople, foreign experts, and maybe even tourists,” Sitkoff said.

Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam, also said that more than 9,300 South Korean businesses in the country using more than one million employees have been affected by COVID-19, and they are longing for new support from the government.

“They need more favourable online administrative procedures, tax payment, loans, and output markets,” Sun said. “Many businesses have had to either shrink or even halt performance. Without support from the Vietnamese government, many will have to face further difficulties.”

Industrial production on the rise

According to the General Statistics Office (GSO), despite enormous difficulties, domestic industrial production is gradually improving because more and more materials and components are being imported into Vietnam for production, not for direct consumption.

The GSO reported that Vietnam’s import turnover – mostly for local production – reached US$159.1 billion in the first six months of 2021, representing a rise of 36.1% year-on-year. Meanwhile, the country’s six-month export turnover hit US$157.63 billion, up 28.4% year-on-year.

“Amid the increasingly complicated COVID-19, business and production activities of enterprises in general and of manufacturing and processing firms in particular in the second quarter have shown positive signals,” said a GSO report on the six-month economic situation.

After growing 6.29% year-on-year in the first three months, industrial production in the second quarter of 2021 increased 11.45% over the rise of just 1.1% in the corresponding period of last year.

In the first half of this year, the rate was 8.91% year-on-year, in which the growth rate of the manufacturing and processing sector ascended 11.42% as compared to that of 5.06% in the same period of 2020.

Under a recent GSO survey over 5,670 manufacturing and processing enterprises, 68.2% of respondents said their second-quarter performance has been better than that in the first quarter. About 77.8% of respondents forecasted that their performance will be better in the third quarter than in the second quarter. Only 22.2% projected that they will have more difficulty in the third quarter.

Moreover, up to 70% of surveyed firms said their orders climbed in the second quarter in comparison to those in the first three months. About 79% of surveyed businesses expect that their orders will be expanded and maintained in the third quarter. Around 83.1% forecast that their new orders in the latter half of this year will be increased and maintained.