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|Businesses line up for further support. Photo: Shutterstock|
Hong Sun, vice chairman of the Korean Chamber of Commerce in Vietnam, told VIR that the business community is expecting more effective solutions from the government to further support businesses.
“COVID-19 has been causing havoc with enterprise performances, so they are in dire need of assistance from the government,” Sun said.
According to him, while Vietnam and South Korea, as well as a number of other nations have been able to brought COVID-19 under good control, the Vietnamese government should ease travelling for foreigners, while still having to apply strict measures on quarantine and quick testing. This will help foreign investors and employees to enter Vietnam easier and revitalise their projects, many of which have been delayed due to the pandemic.
“We hope that the government will make strong decisions on further revitalising the business community and the Vietnamese economy,” Sun said.
Vietnam is now home to over 9,000 South Korean businesses employing more than 200,000 South Koreans and over one million Vietnamese labourers.
“Many businesses are facing massive difficulties, and about 20-30 per cent have to find new markets for their products, but it is not easy as it would need reliability before forging new partnerships,” Sun said.
Echoing this view, the American Chamber of Commerce in Hanoi (AmCham) also encourages the government to look at the effectiveness of different support initiatives.
“For example, while deferring some taxes and insurances is beneficial to some, many businesses see only limited assistance from these programmes,” AmCham Hanoi’s executive director Adam Sitkoff told VIR. “Small businesses need loans to stay alive. We hear from many businesses that are unable to access low interest loans under the government’s loan support package because banks have been rejecting applications over concerns about the borrowers’ ability to repay, and borrowers not being able to show positive cash flow. This seems to be a particular problem in the tourism and hospitality sector right now. We hope government decision-makers can address those standards quickly.”
Many manufacturing businesses in Vietnam face greatly reduced demand and cancelled orders, Sitkoff explained, adding that it is important to understand that the businesses want to keep their workforce but are currently struggling.
“It is bad for the companies if they have to let their employees go and then try to rehire them once things return to normal. It is also bad for the workers and for the government. We very much hope that the government will support businesses to keep workers employed, either at reduced compensation, or by reduced contributions and obligations to the government,” Sitkoff said.
At the government’s cabinet meeting more than a week ago, Prime Minister Nguyen Xuan Phuc stated that despite massive problems, local production is gradually recovering. However, he also admitted that COVID-19 has taken a heavy toll on all facets of the economy and society, with business and production activities hit the hardest. Almost all state-owned and private economic groups, corporations, and firms are badly affected.
Data from the General Statistics Office showed that the first nine months of this year saw about 38,600 enterprises halting performance, up 81.8 per cent on-year.
“We must have stronger measures to support enterprises and investors, and protect the basic living standards for labourers,” the prime minister stressed. “There must be pivotal improvements for the local businesses to intensively participate in global value chains (GVCs).”
A senior expert from the Asian Development Bank in Vietnam told VIR that much remains to be done for Vietnam to help these enterprises in this regard. “Low quality is the key constraint that hinders the domestic private sector in joining GVCs. The low-quality problem has become increasingly acute when technical, quarantine, environment, and health requirements become more stringent as Vietnam is expanding its market access domestically and globally,” he said.
According to the expert, one of the underlining causes that has resulted in low-quality products of the domestic private sector is limited capability to conduct innovation and adapt new technology. Also, relatively few Vietnamese businesses appear to be spending on the purchase or licensing of inventions and knowledge for development of new products and processes.
“Limited access to finance due to stringent collateral requirements by banks, constrained banking procedures, and lack of a well-functioning capital markets, are other factors impeding the domestic private sector in improving their product quality,” he noted.
Wojciech Gerwel - Ambassador Embassy of Poland to Vietnam
There is much economic uncertainty in the wake of the current pandemic. However, Vietnam has achieved impressive results in containing the spread of the virus, so one can be hopeful that its economic prospects in the coming months remain comparatively strong.
The Vietnamese economy has also been strengthened by the implementation of the EU-Vietnam Free Trade Agreement. The agreement has opened up countless trading opportunities and has strengthened Vietnam’s position as an attractive destination for European investors, including Polish investors. The ensuing entrepreneurial activity and job creation is likely to alleviate to some degree the challenges faced by those who have been struggling with the economic consequences of COVID-19.
Short-term economic performance can never be fully dissociated from economic fundamentals and long-term challenges. Over the past three decades, the Polish economy has defied multiple crises and has been a champion of growth in the EU. In Poland, we stand ready to exchange with our Vietnamese friends the insights we have gained in the process of building a sustainable and innovative economy.
Nguyen Hoai An - Director of professional services, CBRE Hanoi
Such a great demand for industrial land leasing is a bright point in the local real estate market since COVID-19 broke out.
Accordingly, under the impact of the pandemic, e-commerce and logistics companies have seen breakthrough growth, bringing about a high demand for spaces utilised in good storage and distributing networks. As a result, the need for land funds to build up logistics facilities has risen significantly.
Over the third quarter this year, the total area of industrial zones in Hanoi, Haiphong, Bac Ninh, Hung Yen, and Hai Duong provinces reached 13,800 hectares, including 9,600ha-land for leasing. Moreover, the covering rate in the areas remains at a positive level of about 78 per cent. The leasing prices in the area have also increased by 20-30 per cent on-year.
Moreover, thanks to the trend of moving out as well as the efficiency of the EU-Vietnam Free Trade Agreement, the demand for industrial land has grown across the country. Thus, even as COVID-19 lingers, the prospects for local industrial land here will still be optimistic.
Le Quang Minh - Head of Research, Mirae Asset Securities
The local economy in Vietnam is likely to maintain somewhat of a recovery trend in the fourth quarter of this year, as economic activities enter into a new type of normal period amid the well-controlled pandemic in this country.
Domestic consumption is expected to improve, as Vietnam is gradually easing social distancing and the pandemic situation is under control, and hopefully will remain so.
Meanwhile, the Vietnamese government is taking a cautious approach to reopening international tourism. Accordingly, the aviation sector is expected to have already seen the bottom and things can hopefully only improve.
Besides that, exports are expected to grow positively thanks to the impact of the signing of the EU-Vietnam Free Trade Agreement and gradually-eased social distancing measures and reopened economy, thus boosting consumption.
Vietnam is forecast to be one of the biggest beneficiaries of the wave of factory relocations post COVID-19. Foreign investment inflows are expected to accelerate as the country loosens restrictions on international flights, and the government will further strengthen loose monetary and fiscal policies to stimulate domestic consumption and investment.
Andreas Vogelsanger - CEO, Asia Frontier Capital Fund
The positive market picture is certainly supported by the relative better economic outlook for Vietnam compared to almost every other nation in the world, as well as by the successful containment of COVID-19, where Vietnam has seen no local infections for around one month.
But unlike other countries such as Thailand, the Philippines, or Singapore, Vietnam is now slowly and very carefully resuming international flights, albeit there will be no positive impact from the international tourist sector for now.
Another reason why we are positive about Vietnam’s development over the next months if not years to come is the ongoing manufacturing shift to Vietnam.
This trend is expected to accelerate due to current trade tensions between the United States and China, the benefit of the various free trade agreements which Vietnam successfully negotiated over the past few years, and the COVID-19 which might trigger wage inflation after the pandemic subsides.
Peter Dinning - Chairman, Colliers International
During nearly 25 years of living in Vietnam, I am privileged to see the significant development of the country from a mostly agricultural economy to a dynamic mixed economy.
In order to ensure that Vietnam can become self-sufficient in all aspects and sustainably grow, among a range of appropriate policies, Vietnam should firstly continue to strengthen poverty reduction policies to create jobs for its people to have enough income to sustain their essential needs as well as improve their quality of life by buying houses, enjoying high-quality education, healthcare, and entertainment services.
Secondly, building a safe and non-violent learning environment is also a priority to prepare the young generation with professional language skills and comprehensive academic knowledge, as well as high-quality vocational training to help them cope with the extremely competitive global labour market.
Finally, Vietnam should continue to improve transport infrastructure backed by fast and efficient policies and strategies to attract investment. This can be achieved by promoting green and energy-saving domestic industries especially within essential sectors such as healthcare, agriculture, power and water, and telecommunications as well as vital manufacturing goods such as personal protective equipment to ensure Vietnam is self-sufficient in providing crucial items.
It can also be done by enacting regulations to reduce taxes, limiting time-consuming licensing and administrative works, and offering more incentives for foreign investors to collaborate with the growing sophisticated government and private local companies.
Dao Xuan Thinh - General director, Thinh Dat Green Tour JSC
Tourism has been one of our key business sectors recent years and in this year as well. Besides the completed Le Champ Tu Le Resort, we are going to finish processing one more luxury resort in famous Mu Cang Chai district and a modern amusement in Tu Le commune in Yen Bai province.
In the past couple of months, COVID-19 has caused serious damage to Vietnam’s tourism industry and of course Le Champ Tu Le Resort is not out of that spiral. We lost a number of bookings from February to August, and numbers are expected to decrease still in the last months of the year.
We are planning to organise other festivities to promote the unique culture of the 12 ethnic minorities in the province. I hope local authorities will assist us quickly. In addition, we would like to connect to other tourism investors to diversify tourist offerings and attract more visitors.
I believe that tightened cooperation between companies like us and local authorities will help awaken the sleeping beauty of many Vietnamese localities effectively.
Those are the measures being implemented at this period, yet in the long run we will continue deploying hygiene measures so that visitors will feel absolutely safe and convenient when staying at our resort venues and other national attractions even after COVID-19 has been contained.
Kim Tae Hee - Head of Capital Markets and Trading Division, Shinhan Bank
With successful preventive measures against COVID-19, Vietnam is still the brightest economic spot thanks to its two engines of growth of export demand and domestic consumption.
The economy has recorded 2.12 per cent GDP growth during the first nine months of 2020 despite negative growth in most parts of the world.
In the months ahead, the World Bank and other financial institutions forecast an annual growth rate of 2.8-3 per cent for Vietnam in 2020, and a return to pre-crisis growth of 6.8-7.8 per cent in 2021.
And Vietnam’s exports shall continue to outperform and attract foreign investment inflows from many countries such as South Korea and Japan thanks largely to several reasons.
First of all, there are the free trade agreements with major trade partners, especially the EU, which is resulting in $700 million of goods to the EU after just months of implementation.
Secondly, many multinational companies have relocated to Vietnam or are still considering it.
Thirdly, a stable and sound financial market in Vietnam will support its high economic growth. The State Bank of Vietnam has stabilised the financial market and carried out monetary easing, including reducing interest rates, by keeping abreast of government fiscal policy.
Besides, the hope for a COVID-19 vaccine also keeps the global economy alive, and it will accelerate the economy of Vietnam. However, this country still faces challenges ahead with uncertainty and high volatility of the global market led by the upcoming US presidential election.
In addition, further deterioration of loan quality in the banking system during COVID-19 could be a challenge as well.
Therefore, to seize the opportunity after the pandemic, the government needs to operate flexibly and open up the capital market to attract more foreign direct investment and foreign institute investor funding.