Vietnam’s well-timed measures to bolster coronavirus-hit businesses

Monday, 2020-03-09 11:15:16
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The government’s quick response is considered a stimulant to help enterprises enhance their resilience and complete their production and business targets for 2020.
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NDO - A string of measures aimed at supporting enterprises seriously affected by the coronavirus outbreak are expected to be introduced in March, including a credit package of VND250 trillion (US$10.8 billion) and a fiscal package of VND30 trillion (US$1.3 billion).

Such measures come at just the right time as Vietnam saw 16,200 enterprises temporarily suspending their business in the first two months of 2020, up 19.5% from a year earlier. With those filing for bankruptcy and having completed bankruptcy procedures included, the number of enterprises that went out of business totalled 28,400, close to the 29,400 enterprises that were newly established or returning to business in the same period.

From the development viewpoint, the bankruptcy of many enterprises reflects the natural transition and dynamism of Vietnamese businesses. Since 90% of Vietnamese businesses are small and ultra-small enterprises, investors will file for bankruptcy, establish new enterprises or temporarily close their business as soon as business performance fails to meet expectations.

In a market economy, it is natural to see a ratio of new and bankrupt enterprises. Among bankrupt enterprises, there is a certain portion of enterprises which have been dormant for a long time but recently had their business licenses revoked under the data standardisation programme.

It is notable that the magnitude of the coronavirus outbreak’s impacts has not been fully reflected in the figures for the first two months due to the lag in the statistic work.

More shocking figures could come in next month when the hardest hit enterprises can no longer sustain their business. Retail and consumer service revenues in the first two months grew at the slowest pace in seven months while international arrivals to Vietnam recorded the steepest fall in four years, sending enterprises in commerce and services scrambling to remain in business.

Manufacturing firms are also struggling as their input materials are expected to run dry in the next two months while their outputs are also facing difficulties as export market close following the break-up of the global supply chain. The Ministry of Planning and Investment forecasts that the number of newly established enterprises will drop in almost all sectors, leading to a sharp fall in employment, especially in entertainment, accommodation, tourism and food services. Small and medium-enterprises and cooperatives will be the hardest hit businesses by the coronavirus outbreak.

The government’s quick response is considered a stimulant to help enterprises enhance their resilience and complete their production and business targets for 2020. In addition to stimulus packages, the Prime Minister also requested a speed-up in the improvement of the business climate. Experts say streamlining administrative procedures and improving the business environment must also be implemented with boldness like fighting the coronavirus outbreak so as to reduce costs for businesses, thus helping them to overcome this difficult period.

Furthermore, accelerating the task of improving the business climate will also bolster the start-up wave such that the Vietnamese business community will become larger and have better quality, a prerequisite for Vietnam to achieving greater economic growth.